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Crude Oil Pares Early Losses, Advances 3% on OPEC Cuts

January 2, 2019 at 16:41 by Andrew Moran

Crude oil futures are trading higher midweek after falling into the red to start the session. US crude prices are rallying on news that the Organization for Petroleum Exporting Countries (OPEC)’s supply cuts are kicking in, offsetting data that Russia reported record output and Iraq boosting exports. The 10% surge in the last week is a positive development for a market that hit bear territory after plunging 33% since October.

February West Texas Intermediate (WTI) crude oil futures surged $1.38, or 3.04%, to $46.82 per barrel at 15:12 GMT on Wednesday on the New York Mercantile Exchange. US crude prices shed 17% in 2018, marking the first annual dip since 2015.

Brent, the international benchmark for oil prices, is also soaring this holiday-shortened trading week. March Brent crude futures tacked on $1.71, or 3.16%, to $55.51 a barrel on London’s ICE Futures Exchange. Brent prices dropped 11% last year.

On Wednesday, it was reported that Russian output levels reached a post-Soviet Union record in 2018, while new figures highlighted that US production reached a record in October. The market took a further hit that Iraq increased crude exports last month.

This initially sent oil prices tumbling, but then it was confirmed that OPEC and several non-members slashed output to start the year.

But lower oil prices are pleasing President Donald Trump, recently tweeting:

“Do you think it’s just luck that gas prices are so low, and falling? Low gas prices are like another Tax Cut!”

It might also make US oil firms happy because they can remain profitable if a barrel of crude is priced in the $35-to-$40 range. A lot of foreign rivals depend on at least $50 to remain in the black.

Overall, the market is anticipating a modest upward correction in 2019.

On the data front, the US Energy Information Administration (EIA)’s weekly supply report has been delayed because of the holiday. Also, the total Baker Hughes oil rig count stood at 885, up from 883 in the previous week.

In other energy commodities, March natural gas futures edged up $0.03, or 1.09%, to $2.88 per million British thermal units (btu). February gasoline futures spiked $0.065, or 5.11%, to $1.36 a gallon. February heating oil futures soared $0.06, or 3.6%, to $1.74 per gallon.

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