Saudi Arabia Cut Crude Exports in January After OPEC Agreement

Saudi Arabia Cut Crude Exports in January After OPEC Agreement”

Futures lost as much as 1.9 percent in NY after gaining 0.6 percent last week. "The OPEC cuts were good enough to prevent a repeat of the glut of previous year, but it's a different story if you want to have oil at US$60 or US$70". All of this has combined to drive prices lower.

May West Texas Intermediate Crude Oil closed at $49.31, up $0.07 or +0.14%.

OPEC's latest monthly report showed global oil stocks in January rose to 278 million barrels above the five-year average. Oil slid 84 cents to $47.94 at 8:40 a.m.

Saudi energy minister Khalid al-Falih has said the kingdom will adhere strictly to its commitment to cut output and that state oil giant Saudi Aramco was cutting exports. An OPEC panel is scheduled to meet this month to review compliance with the current deal. "They will more likely opt for income and will push to get help from non-OPEC".

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Despite thin Asian trading that resulted from a Japanese holiday, the dollar edged down against its primary trading partners, with the dollar index starting the week at 100.140.DXY, a 0.16 percent decline. At the same time, high inventories internationally have slowed new purchases, putting a downward pressure on prices. It also estimates that US WTI and Brent crude oil prices will average $56.2 per barrel and $57.2 per barrel, respectively, in 2018. It was the biggest decline since November. We haven't seen any signs of a drawdown in global inventories so far this year and this is a big risk going forward too. Many shale producers view $50 as a benchmark price for profitability.

"An extension to the cuts may be necessary before the market will rebalance, which may be easier said than done as that would involve conceding further market share to the US", Erlam said.

"The OPEC cuts are real and are cleaning up the market", Citigroup analysts including Seth Kleinman wrote in a report earlier this week. Deutsche Bank AG predicted Thursday that the group will extend the cuts not only through the end of this year, but also through the end of 2018. Opec's 11 members with supply targets cut output to 29.68 million bpd in February, 123,000 bpd more than required by target.

There is also disparity between official Opec supply data and secondary source data which makes it hard to gauge the extent of supply cuts.

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