Oil rebounds to $81, pares gain as IEA sees adequate supply

Gladys Abbott
October 16, 2018

This, combined with a massive United States stock sell-off and growing concerns that trade disputes will adversely impact oil have weighed on oil prices this week.

OPEC Secretary-General Mohammad Barkindo said the oil cartel "remains ready to keep oil markets fully supplied". Commodities were hit by the USA stock sell-off this week as risk aversion spread through global markets.

Members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing allies such as Russian Federation agreed in June to raise oil output. On Thursday, crude oil futures ended down $2.20, or 3%, at $70.97 a barrel, after having shed 2.4% a session earlier.

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Global benchmark Brent crude fell 12 cents a barrel to $80.15 by 11:47 a.m. EDT (1547 GMT), after dropping 3.4 per cent on Thursday. The IEA welcomes this boost to supply; however, with Iran's exports likely to fall by significantly more than the 800 kb/d seen so far, and the ever-present threat of supply disruptions in Libya and a collapse in Venezuela, we can not be complacent and the market is clearly signalling its concerns that more supply might be needed. Total volume traded was about 17 percent above the 100-day average. Canada's main benchmark crude index, Western Canada Select (WCS) is now trading at $26.2 per barrel, which is nearly $55 barrel per barrel discount to Brent and $45 per barrel discount to WTI. WTI is on track for a 3.5 percent decline this week.

They were moving in step with a two-day selloff across global stock markets — a move that raised concerns about economic resiliency and eventual energy consumption. WTI traded around 72 per barrel on Friday, whilst Brent looked set to end the week at around 81 per barrel. The Bloomberg Commodity Index had its first back-to-back drop in three weeks on Thursday as oil and aluminum prices plunged, and is on course for the first weekly drop in four weeks.

Elsewhere, US crude inventories rose by 6-million barrels last week, the Energy Information Administration said, more than double analysts' expectations of a 2.6-million-barrel increase. Inventories at the key storage hub in Cushing, Oklahoma, have gained for a third straight week, while stockpiles in the Strategic Petroleum Reserve fell by 1.31 million barrels, the EIA said. Off-topic, inappropriate or insulting comments will be removed.

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