Oil Steadies Amid Middle East Tensions, Shrinking Stockpiles

Futures held near $61 a barrel in New York.

Sheela Tobben

03 Jan 2020, 05:24 AM IST

Oil Steadies Amid Middle East Tensions, Shrinking Stockpiles

A clean-up crew member positions a suction pipe in a pool of crude oil, leaked from a burst pipeline in the Arava desert, during the clean-up operation in the Evrona nature reserve near Eilat, Israel. (Photographer: Ariel Jerozolimski/Bloomberg)

(Bloomberg) -- Oil settled above $61 a barrel after posting its biggest annual gain in three years amid elevated tensions in the Middle East and signs that U.S. crude stockpiles fell further.

Futures in New York rose Thursday but are set to post the first weekly decline in five weeks. Defense Secretary Mark Esper said Thursday that the U.S. was prepared to deploy more troops to Iraq. An Iran-backed Iraqi militia withdrew from the U.S. embassy in Baghdad after storming the compound to protest deadly American airstrikes earlier this week.

Meanwhile the American Petroleum Institute reported crude inventories fell 7.8 million barrels last week, according to Reuters. If confirmed by the weekly U.S. government data due Friday, it would be the largest drop since August. There were other bullish signs for crude with the 50-day moving average for West Texas Intermediate rising above the 200-day marker.

Oil had a strong end last year after the Organization of Petroleum Exporting Countries and its allies agreed to deepen output cuts, and a breakthrough in the U.S.-China trade dispute. President Donald Trump said he will sign the first phase of a deal on Jan. 15 and later go to Beijing to begin talks on a second stage.

The market is now waiting for signs that the deal between the U.S. and China is actually working, said Gene McGillian, manager for market research at Tradition Energy. “We need to see real signs of economic growth.“

Traders are also watching for indications that OPEC+ production cuts are actually tightening supply, and not being offset by the rising supply from non-OPEC producers such as Norway, Guyana and Brazil, McGillian added.

WTI for February delivery settled up 12 cents to $61.18 a barrel on the New York Mercantile Exchange. The contract lost 62 cents on Tuesday but still ended the year 34% higher.

Brent for March settlement rose 25 cents to $66.25 a barrel on London’s ICE Futures Europe exchange, and traded at a $5.30 premium to the WTI for the same month.

Crude stockpiles at the storage hub of Cushing, Oklahoma, dropped by 1.4 million last week, Reuters reported, citing API data. The countrywide data compares with a 3 million-barrel decline forecast in a Bloomberg survey.

Other oil-market news
Gasoline futures rose less than 1% to $1.7042 a gallon. OPEC’s output declined last month as several Persian Gulf producers stepped up their implementation of cutbacks aimed at balancing global oil markets. America exported more crude and refined products than it imported in October, marking the second consecutive month of being a net petroleum exporter, according to the EIA Petroleum Supply Monthly report. Russia’s crude oil and condensate output hit a post-Soviet high last year even as it curbed production under an agreement with OPEC.

Other oil-market news

Gasoline futures rose less than 1% to $1.7042 a gallon.
OPEC’s output declined last month as several Persian Gulf producers stepped up their implementation of cutbacks aimed at balancing global oil markets.
America exported more crude and refined products than it imported in October, marking the second consecutive month of being a net petroleum exporter, according to the EIA Petroleum Supply Monthly report.
Russia’s crude oil and condensate output hit a post-Soviet high last year even as it curbed production under an agreement with OPEC.

To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Mike Jeffers