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Crude Oil Firms as Kuwait Cuts Supply More Than Expected

By:
James Hyerczyk
Published: Dec 16, 2016, 16:54 UTC

Crude oil prices rose on Friday amid signs that producers were slowly moving towards adhering to the deal to reduce output. The plan by OPEC and other

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Crude oil prices rose on Friday amid signs that producers were slowly moving towards adhering to the deal to reduce output. The plan by OPEC and other major non-OPEC producing countries is expected to officially begin in January, but some countries are already taking steps to ease into the transition. It is designed to reduce supply overtime and stabilize prices.

Reports show that Kuwait, Saudi Arabia and Abu Dhabi have already notified its Asian customers that production cuts are coming. Russian also said on Friday that all of its country’s oil companies, including top producer Rosneft, had agreed to reduce output.

Kuwait told customers it was cutting supplies more than initially expected.

Also on Friday, Goldman Sachs said it expects Brent Crude oil to trade between $55 and $60 per barrel after the first half of 2017.

Not all the news on Friday was bullish which may be why the upside has been limited. Iraq announced it had signed new deals that will increase its sales to Asian customers like China and India despite its commitment to reduce output by 210,000 barrels per day.

Libya is also close to ramping up its production. It received an exemption from the OPEC deal because its output had been slowed by unrest in the country.

Natural Gas

Natural gas futures are trading lower on Friday as investors reacted to a new forecast calling for warmer temperatures in key demand areas over the next two weeks. Despite yesterday’s U.S. Energy Information Administration’s weekly report showing a greater than expected drawdown of 147 billion cubic feet in the week-ended December 9, speculators lightened up on the long side as the weather news outweighed government storage data that showed the unexpectedly large draw from inventories.

Traders are pressuring March Natural Gas futures on Friday in reaction to a weather forecast for December 16 to 22 that calls for a reinforcing polar blast into the central and southern U.S. this weekend and into early next week and a build of warmer temperatures over the eastern U.S. mid to late next week. Natural gas demand is expected to be stronger than normal the next 7 days then ease to moderate during the middle of next week.

Forex

Profit-taking and position-squaring ahead of the week-end and perhaps the Christmas and New Year holidays help drive up the battered Japanese Yen and Euro on Friday. Both markets took a heavy hit earlier in the week after the U.S. Federal Reserve raised its benchmark interest rate and forecast as many as three rate hikes in 2017.

The news triggered a spike to the upside in U.S. Treasury yields and a subsequent move in the U.S. Dollar against a basket of currencies.

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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