Oil Inches Higher But Struggles to Break Through $61 a Barrel
Oil held its biggest decline in three weeks as Kuwait signaled a deal with Saudi Arabia to renew crude output along their border
(Bloomberg) -- Oil edged higher in light trading, but the rally was limited on news that Kuwait aimed to reach a deal with Saudi Arabia that will restore crude output along their border, and as U.S. shale drillers boosted drilling.
February futures rose 0.1% New York Monday. Hedge funds increased bullish bets in the week ended Dec. 17 to the highest level in more than seven months amid optimism over for a U.S.-China trade truce, according to data released Friday. But gains were capped as investors weighed news the Kuwait-Saudi shared neutral zone, which has been shut for at least four years due to disputes between the two countries, can produce as much as 500,000 barrels a day.
Oil is having one of its best months of the year on U.S.-China trade optimism and after an agreement to deepen output cuts by the Organization of Petroleum Exporting Countries and its allies also provided a boost. Still, analysts cautioned of a potential supply surplus next year.
“We think the rally is overdone on the upside in spite of OPEC cuts and the demand picture,” said Bart Melek, head of global commodity strategy at TD Bank in Toronto. “Even considering a better economic environment, we are still seeing a significant surplus for the next two quarters.”
Working oil rigs in the U.S. increased by 18 last week to 685. In the Permian Basin of Texas and New Mexico, drillers deployed 15 additional rigs, wiping out several weeks of declines.
West Texas Intermediate for February delivery gained 8 cents to $60.52 a barrel on the New York Mercantile Exchange. The contract on Friday settled at $60.44.
Brent for February settlement gained 25 cents to $66.39 a barrel on the ICE Futures Europe Exchange, after losing 40 cents on Friday. The global benchmark crude traded at a $5.87 premium over WTI.
Kuwait and Saudi Arabia could reach an agreement on the neutral zone by the end of this year, Kuwaiti Oil Minister Khaled Al-Fadhel said on Sunday. An actual resumption of output at the zone’s Wafra and Khafji oil fields would depend on a political decision. The area wouldn’t add oil to global markets because both nations adhere to OPEC supply limits, a person familiar with Saudi thinking said in October.
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--With assistance from James Thornhill and Ann Koh.
To contact the reporters on this story: Kriti Gupta in New York at kgupta129@bloomberg.net;Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers
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