Oil markets diverge, with United States crude rising while Brent takes a knock

Delia Watkins
February 21, 2018

World oil prices are changing without a single dynamics on February 20 after Saudi Arabia made a decision to cut production at the end of last week, although the USA continues to increase it.

U.S. West Texas Intermediate (WTI) crude futures CLc1 settled up 22 cents, or 0.4 percent, at $61.90 a barrel, as the March contract expired.

Oil prices stabilize and gradually recover after a sharp fall at the beginning of the month.

However, since the data was compiled, Brent crude has risen almost 5%, and Tuesday's drop looked more technical rather than based on supply and demand fundamentals.

The Organization of the Petroleum Exporting Countries and 10 producers outside the cartel, including Russian Federation, have been holding back crude output by 1.8 million barrels a day since the start of previous year. This figure is still below the quota of Saudi Arabia at 10.058 million barrels per day. This shift has made it less enticing for consumers in Europe to import US crude.

Global oil demand for 2018 was estimated to grow by 1.6-million barrels a day due to an "encouraging environment", he said.

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WTI has gained more than 8 per cent since the end of November, when the Organisation of Petroleum Exporting Countries and its allies agreed to extend an output-curb deal until the end of this year. It remains to be seen whether these declines will signal a buy to push markets higher or whether they will begin a longer-term downtrend.

UMW Oil and Gas Corp Bhd rose 1.5 sen or 4.69% to 33.5 sen, with 20.35 million shares traded, valuing the company at RM2.71 billion.

Saudi Arabia told OPEC that it pumped 9.983 million bpd in January.

OPEC's biggest producer, which has cut output since past year under an agreement between OPEC and other producers to ease a supply glut, pumped 9.980 million bpd of oil in December, according to the data from the Joint Organizations Data Initiative (JODI). Surging American oil production continues to challenge Opec's efforts to alleviate a global oversupply, with forecasts pointing to record output from Permian shale basin that would put the region on par with some of OPEC's biggest producers.

"Opec and Russian Federation continue to support the production cuts that are due to expire at the end of this year, and they assure markets that there will be an orderly ramp up of production once the cuts expire", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

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