Saudi Arabia 'Pumps' Oil Prices Higher

Sean Reid
April 20, 2018

An Energy Information Administration report showed shrinking American petroleum surpluses and the first crude withdrawal from the largest US storage complex in six weeks.

IHS expects the oil price to be lower in 2019 on the expectation of rising U.S. production that could cause the market to over-supply again.

"Saudi Arabia wants higher oil prices and yes, probably for the IPO, but it isn't just that", an OPEC source said.

U.S. West Texas Intermediate (WTI) crude futures rose 71 cents to 69.18 dollars a barrel. WTI has gained almost 8 percent in the last eight days of trading.

U.S. West Texas Intermediate (WTI) crude futures were up 57 cents at $69.03 as of 11:25 a.m. EDT (1525 GMT), after earlier hitting $69.56, their highest since November 28, 2014. Stockpiles of gasoline also dropped by 3 million barrels, while distillate fuels including diesel declined by 3.1 million barrels.

"It's a bullish report with the across-the-board drawdowns in everything", John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC.

"Product demand was strong, products (inventories) were lower, crude was lower - it was really across the board supportive", said Robert Yawger, director of energy futures at Mizuho. For example, ConocoPhillips earned $1.6 billion in the fourth quarter of 2017, a significant improvement from 2016, when it posted a net loss of $35 million. The country - OPEC's biggest producer - is targeting a crude price of $80 or even $100, Reuters reported.

The data showed a decline of 1 million barrels, a 19.7% drop compared to a year ago, despite the growth in oil production, which has reached 10.54 million per day (+14% y/y).

Yields on USA two-year Treasuries stood at levels last visited in 2008 at 2.43 percent.

"Over the past year, Saudi Arabia has emerged as OPEC's leading supporter of measures to boost prices, a change from its more moderate stance in earlier years".

While analysts forecast Brent to rally up to $80 per barrel in the run up to the United States strikes against Syrian targets, such a high is likely to remain for a "short period but not be sustained", cautioned Spencer Welch, oil markets director at IHS Markit.

That supported figures from the American Petroleum Institute released on Tuesday that showed a surprise draw down in crude stocks for the week to April 13, overturning expectations. Saudi Arabia, OPEC and non-OPEC nations including Russian Federation are pursuing oil prices of $80-$100 by shorting the output. Global markets for equities, currencies and metals have all been whipsawed by the uncertainty over what President Donald Trump's next geopolitical move would be.

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