Published: Tue, January 22, 2019
Business | By Pearl Harrison

Oil climbs 1pc on OPEC output cut, but USA production robust

Oil climbs 1pc on OPEC output cut, but USA production robust

Oil prices were up early on Monday, steadying at a two-month high last seen in mid-November, as the plunging USA rig count last week signaled a slowdown in shale drilling amid the lower price of oil.

US bank Morgan Stanley in turn cut its 2019 oil price forecasts by more than 10 percent, pointing to weakening economic growth expectations and rising oil supply, especially from the United States.

Oil prices rose on Tuesday as market sentiment was lifted by news that China might roll out further fiscal stimulus measures.

In response to the drop in price in the second half of last year, OPEC and non-members plan to cut production by a joint 1.2 million bpd this year.

Iran registered the third-largest decline in output, also involuntary, as US sanctions that started in November discouraged companies from buying its oil. Venezuela risks a fresh plunge in oil output, Barclays analysts said in a note.

Since the beginning of 2017, the implementation of the agreement on the reduction of oil production has reached a level of 116%, the organization said in a report.

By Carlos Caminada and Alex Nussbaum Investors are the most optimistic on oil in two months as the worst fears that roiled markets at the end of the year start to dissipate. After closing out 2018 in free-fall, US crude prices have rebounded more than 18 percent to start this year. A previous OPEC+ supply curb starting in January 2017 - when OPEC production fell by 890,000 bpd according to OPEC figures - got rid of the 2014-2016 glut.

Brent crude oil futures LCOc1 were down $0.44 at $60.88 a barrel by 1035 GMT, while U.S. crude futures CLc1 fell by $0.53 to $51.78 a barrel.

Expectations that the United States may grant waivers on sanctions it imposed on importing Iranian oil to fewer countries could also ease concerns about oversupply. Net imports are expected to continue to fall, to an average of 1.1 million bpd this year, and to less than 100,000 bpd in 2020.

In its latest monthly report, the Paris-based International Energy Agency said the Saudis took the lead by cutting output in December as prices tumbled by more than a third in just two months.

With the rig count stalling, last year's growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd.

American crude output is poised to expand by 1.1 million barrels a day this year, according to the IEA, which sees the US exceeding the Saudis' maximum level within the next six months.

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