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Crude Oil Boosted by Reports of Growing Compliance with Output Plan

By:
James Hyerczyk
Published: Jan 12, 2017, 16:42 UTC

Crude oil prices rose a second day on Thursday, bolstered by reports that several of OPEC’s key players were complying with the cartel’s plan to curb

Crude Oil OPEC-flag

Crude oil prices rose a second day on Thursday, bolstered by reports that several of OPEC’s key players were complying with the cartel’s plan to curb output. Additional support was provided by forecasts of strong demand growth in China.

At the mid-session, U.S. March West Texas Intermediate crude oil was trading $53.00, up $0.77 or +1.4 percent. International Brent crude oil was up 92 cents, or 1.6 percent, at $56.02 a barrel.

Traders are reacting positively today to reports that show compliance to the plan by OPEC and non-OPEC members to cut output. By some measures, compliance with production cuts is hovering around 73 percent. A list of the biggest cooperating players includes Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman – mostly members of the Gulf Cooperation Council.

Once again, OPEC attempted to prop up prices with positive comments. According to reports, Saudi Arabian Energy Minister Khalid al-Falih said on Thursday the OPEC deal would accelerate the rebalancing of the global oil market and that prices would respond later this year.

Kuwaiti Oil Minister Essam Al-Marzouq also said Kuwait has already cut its oil output by more than it pledged. Iraq claimed it had reduced oil exports by 170,000 bpd and was cutting them a further 40,000 bpd this week, according to Iraq oil minister Jabar al-Luaibi. He also said Iraq was “hoping for a better price.”

The market was also supported by a report from state-owned China National Petroleum Corp (CNPC). It said that China’s net crude imports will rise 5.3 percent to 396 million tons (around 8 million bpd) in 2017. This should push exports to a record 594 million tons this year, or about 12 million bpd.

Gold

Gold futures are surging at the mid-session amid a triple-digit sell-off in the Dow Jones Industrial Average and further weakness in the other major indexes. Investors are selling positions in equities and buying gold as a hedge against a further decline. Dollar-denominated gold is also being supported by a weaker U.S. Dollar. The dollar is under pressure because lower Treasury yields are making the Greenback a less desirable investment.

Economic News

Earlier today, Philadelphia Fed President Patrick Harker said in prepared remarks that three rate hikes by the Fed are appropriate. Chicago Fed President Charles Evans was a bit more cautious, saying the economy could grow strongly for a bit, but that it was likely unsustainable.

Later today, investors will get the opportunity to react to several Fed speakers including St. Louis Fed President James Bullard, Dallas Fed President Rob Kaplan and Fed Chair Janet Yellen. She is expected to speak to educators at 0000 GMT.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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