Oil rises expectations of production cuts

Oil futures surged by more than $ 1 a barrel yesterday, recovering half of the losses of about 5% recorded in the previous session, while lower prices could lead to a reduction in production. .

The barrel of brent reached $ 57.81 per barrel, up $ 1.58 or 2.81% from the previous close. US West Texas Intermediate (WTI) crude oil futures increased by $ 1.61, or 3.15%, to $ 52.70 per barrel.

Crude oil futures have fallen to their lowest level since January Wednesday, after a surprise rise in US crude stocks, as well as fears that demand growth this year will be affected by China's trade war. and the United States.

Analysts said crude prices rose yesterday due to forecasts that Saudi Arabia, the world's largest oil exporter, and other producers in the Organization of Exporting Countries Oil (OPEC) could support the market by reducing supplies. Bloomberg said in a report Wednesday, citing a Saudi official, that his country was in talks with other producers in order to stem the fall in oil prices.

The US Energy Information Administration lowered its growth forecast for domestic oil production this year after Hurricane Barry disrupted production in the Gulf of Mexico in July. Production is forecast to increase by 1.28 million barrels per day to 12.27 million barrels per day this year, slightly below previous growth forecasts of 1.40 million barrels per day.

Exports

A Saudi oil official said the kingdom plans to keep its crude oil exports to less than 7 million barrels a day in August and September, despite strong customer demand to help reduce global crude oil inventories and reduce oil prices. rebalance the market.

The official said that Aramco's state-owned oil allowances, and refiners 'and customers' orders to buy Saudi crude were high in September, a sign of strong global demand for oil. oil. However, the official said the kingdom will keep its oil production below 10 million bpd and its exports remain below 7 million bpd in August and September.

"Global demand is stronger in all regions," said the manager. But we keep our exports below seven million barrels a day. "If we meet the demand in September, we will produce about 10.3 million barrels a day because demand is very strong, but we have decided to keep production and exports stable and reduce customer orders by 700,000 barrels a day. "

The production goal of Saudi Arabia under a production reduction agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies, within the 39, a group known as OPEC +, is 10.3 million barrels a day. In July, OPEC and its allies led by Russia agreed to extend reductions in their oil production until March 2020 in order to support crude oil prices, while the global economy took over. Weakened and that American production increased.

"Saudi Arabia is determined to do everything in its power to maintain the market equilibrium next year," the official said. We believe that, based on close contacts with major OPEC countries, they will do the same. "" The fundamentals of the oil market are good, especially on the supply side, due to the combination of a strong commitment beyond OPEC + and US expectations. compared to previous estimates. "