Oil Rebounds With U.S. Stocks
October 19 2018 - 12:55PM
Dow Jones News
By Stephanie Yang and Christopher Alessi
Oil prices rose off of a five-week low on Friday, buoyed by a
broader recovery in U.S. stocks.
Light, sweet crude for November delivery rose 1.2% to $69.47 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, gained 1.4% to $80.36 a barrel.
Prices fell to the lowest level since Sept. 13 on Thursday, hurt
by climbing supplies in the U.S. and weakness in major U.S. stock
indexes off disappointing economic data from China. However, a
rebound in shares on Friday helped the crude market stabilize,
traders said.
"We've been playing risk on, risk off," said Tariq Zahir,
managing member of Tyche Capital Advisors. "We're really watching
from more of a global macro standpoint here."
Oil has also come under pressure from data showing that
inventories are on the rise. On Wednesday, the U.S. Energy
Information Administration reported that stockpiles of crude oil
rose by 6.5 million barrels in the week ended Oct. 12 to their
highest level since late June.
"US inventories now show a clear surplus to the five-year
average and are trending higher, suggesting the market remains
well-supplied for the moment," said analysts at Schneider
Electric.
Still, traders said potential supply disruptions still remain on
the horizon, with Iranian sanctions set to come into effect in
early November.
The International Energy Agency last week said Iranian supply
fell to a 2 1/2 -year low in September as buyers continued to
reduce their purchases before the Nov. 4 deadline. Crude production
fell by 180,000 barrels a day month-on-month, to stand at 3.45
million barrels a day last month, the agency said.
Meanwhile, the Organization of the Petroleum Exporting Countries
is struggling to increase output to make up for the barrels lost
from Iran and Venezuela, according to a Reuters report.
Prices were also bolstered by a late September decision by the
Organization of the Petroleum Exporting Countries and its
production allies not to ramp up crude output at a faster pace than
planned. Saudi Arabia and Russia in June engineered a plan for OPEC
and its partner producers to gradually begin increasing production
after more than a year of holding back output.
But now "concerns about a tightening of supply, which
predominated until two weeks ago, have abated despite the fact that
the reasons for them -- falling Iranian oil exports, declining oil
production in Venezuela, reduced spare capacities -- still apply,"
analysts at Commerzbank wrote in a daily note Friday. "It appears
that the IEA's significantly more relaxed outlook for next year has
prompted many market participants to look beyond the supply
shortage until year's end."
Both the IEA and OPEC last week cut their estimates for global
oil demand growth for both this year and next.
Gasoline futures rose 1.9% to $1.9274 a gallon and diesel
futures rose 1% to $2.3175 a gallon.
Write to Stephanie Yang at stephanie.yang@wsj.com and
Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
October 19, 2018 12:40 ET (16:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.