Oil prices rise amid lifted market sentiment

2019 US Oil Output to Average 12MM Barrels Per Day

This was at the backdrop of the Organisation of Petroleum Exporting Countries, OPEC, intensifying efforts to withdraw excess oil from the volatile market yesterday.

After the USA granted waivers to eight key Iranian oil customers to continue importing oil from Iran until early May this year, Saudi Arabia and its allies at OPEC and non-OPEC Russia pared back production as the market started to fear a growing oversupply amid uncertain demand growth.

Brent crude LCOc1 was up 82 cents, or 1.3 percent, at $62 a barrel at 1200 GMT.

Stronger spreads suggest OPEC's cuts have succeeded in shifting market expectations about the outlook for 2019. EIA expects non-OPEC producers will increase oil supply by 2.4 million b/d in 2019 which will offset forecast supply declines from OPEC members, resulting in an average of 1.4 million b/d in total global supply growth in 2019.

In a sign that global supply could tighten further, a USA -based think-tank predicted that the United States may grant waivers on sanctions it imposed on importing Iranian oil to fewer countries.

Ashton Whiteley analysts say the OPEC-led cuts may offer only a temporary reprieve as global demand and the threat of oversupply provide the biggest risk to oil prices.

"It looks as if the market is coming into balance, and maybe into deficit later in the first part of the year", Neil Atkinson, head of the oil industry and markets division at the IEA, said in a Bloomberg television interview.

It was the biggest decline since February 2016, as drillers reacted to the 40 percent plunge in USA crude prices late past year.

Prices are likely to keep climbing at least until April, she said, when the United States is due to decide whether to extend waivers against sanctions for buyers of Iranian oil. Meantime, China and India declared that their preference is to continue buying Iranian crude even after the expiry of the waivers.

Saudi Arabia, which is the largest oil producer among OPEC states, will reduce output by 322,000 barrels per day - to 10.31 mln barrels. However, a coalition of 13 countries in the Americas (the Lima Group), announced in early January that they would not recognize Maduro as legitimate. According to the statement, the countries voluntarily undertook these obligations.

The most important bearish factor is the rise of U.S. unconventional oil production, the expert believes.

He recalled that world oil prices fell between 2013 and 2016 (four consecutive years) and rose in 2017 and 2018 (annual averages). Refineries operated at 94.6 percent of their operable capacity. The oil and gas rig count is now 136 up from this time past year, 121 of which is in oil rigs.

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