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Crude Oil Surges 5% on Lower US Inventories, Falling OPEC Output

Summary:
US crude oil futures surged as high as 5% midweek as traders were upbeat over tumbling domestic inventories and falling Organization for Petroleum Exporting Countries (OPEC) production levels. Oil prices were further lifted on comments by OPEC members that additional efforts to stabilize global crude markets were on the table. February West Texas Intermediate (WTI) crude oil futures advanced .35, or 4.76%, to .15 per barrel at 17:45 GMT on Wednesday on the New York Mercantile Exchange. US crude prices are off to a hot start in 2019, climbing nearly 14% year-to-date. Brent, the international benchmark for oil prices, surpassed the key threshold in the middle of the trading week. March Brent crude futures soared .47, or 4.21%, to .19 a barrel on London’s ICE Futures exchange.

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US crude oil futures surged as high as 5% midweek as traders were upbeat over tumbling domestic inventories and falling Organization for Petroleum Exporting Countries (OPEC) production levels. Oil prices were further lifted on comments by OPEC members that additional efforts to stabilize global crude markets were on the table.

February West Texas Intermediate (WTI) crude oil futures advanced $2.35, or 4.76%, to $52.15 per barrel at 17:45 GMT on Wednesday on the New York Mercantile Exchange. US crude prices are off to a hot start in 2019, climbing nearly 14% year-to-date.

Brent, the international benchmark for oil prices, surpassed the key $60 threshold in the middle of the trading week. March Brent crude futures soared $2.47, or 4.21%, to $61.19 a barrel on London’s ICE Futures exchange. Brent is also off to a great start as it has risen 14% YTD.

According to the US Energy Information Administration (EIA), domestic crude stockpiles declined by 1.7 million barrels for the week ending January 4, which is in line with market expectations. Gasoline inventories increased by 8.1 million barrels, while distillate supplies jumped by 10.6 million barrels.

The Baker Hughes total oil rig count stood at 877, down from 885 in the previous week.

Oil investors are jubilant over remarks by Khalid al Falih, Saudi Arabia’s Minister of Energy, who promised to stabilize the oil market, adding that the agreement between OPEC members and non-members to slash output is already showing results. In December, OPEC oil production tumbled by 630,000 barrels per day (bpd) to a six-month low of 32.43 million barrels.

Meanwhile, there is plenty of optimism surrounding US-China trade talks as they completed a third day of negotiations on Wednesday. Local reports suggest that the Chinese leadership is eager to end the trade dispute but noted that any pact must contain compromises. Should the world’s two largest economies strike a new trade deal, then Beijing could rejuvenate its economy and spur demand for crude. On the other hand, without an agreement in place, then the gradual collapse will continue.

A lower buck helped energy commodities as the US dollar plunged 0.69% to 95.24. A weaker greenback is good for commodities pegged in dollars because it makes it cheaper for foreign investors to purchase.

In other energy markets, March natural gas futures were flat at $2.83 per million British thermal units (btu). February gasoline futures tacked on $0.06, or 4.47%, to $1.42 a gallon. February heating oil futures added $0.05, or 2.78%, to $1.87 per gallon.

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Andrew Moran
I am a full-time professional writer. Prior to my self-employment, I worked as a reporter for Digital Journal covering the politics beat and The Toronto Times reporting on the city’s entertainment scene. I currently write mostly about business, marketing and finance

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