6/17/98 Crude-Oil, Products Rally On Nymex After Russia Agrees To Cut Oil Exports
NEW YORK -(Dow Jones)- Crude-oil and petroleum-products futures finished sharply higher Wednesday on the New York Mercantile Exchange, with crude earlier breaking above $13 soon after news Russia agreed to cut oil production to help stop the decline in world oil prices. The market was also supported by weekly inventory data.
"This market has been so deeply oversold that it needed a strong recovery," said Tom Bentz, an energy analyst with Cresvale International. "Supportive inventory stats and fears that OPEC will make substantial output cuts set us off."
July crude oil jumped 62 cents to end at $12.60 a barrel, off its high of $13.10. August crude oil added 46 cents to settle at $13.69 a barrel.
Among products: July unleaded gasoline finished up 0.58 cent at 46.51 cents a gallon. July heating oil closed up 0.35 cent at 37.32 cents a gallon.
July natural gas jumped 18.5 cents to settle at $2.174 per million BTUs, after tumbling more than 11 cents Tuesday.
Moscow added 63,000 barrels a day to the latest effort by oil producers to reduce exports to an oversupplied world market. While the amount wasn't much, it added to the perception that oil producers just may make enough cuts to allow a recovery in oil prices.
At Tuesday's Gulf Cooperation Council meeting in Riyadh, which brought together several Arab oil ministers, the United Arab Emirates and Kuwait each agreed to cut output by 75,000 barrels a day, and non-OPEC Oman agreed to cut by 20,000 barrels a day. That brought total output pledges secured under the second round of cuts to 803,000 barrels a day. Prior to the GCC meeting, Saudi Arabia, Venezuela, Qatar, Iran, and non-OPEC Mexico agreed to 570,000 barrels a day in cuts.
Kuwait's oil minister Sheik Saud Nasser Al-Sabah, who attended the GCC meeting, said he expects total pledges this time around to reach 1.2 million barrels a day by the time OPEC meets next week in Vienna, a figure most analysts agree will allow oil futures to mount a sustained recovery.
Meanwhile, weekly inventory figures, which showed a draw in U.S. crude oil stocks, sparked the day's short covering rally, said traders. The American Petroleum Institute Tuesday evening reported that U.S. crude oil stocks had dropped 1.135 million barrels to 344.496 million barrels in the week through June 12. The U.S. Department of Energy Wednesday morning reported a larger draw of 2.7 million barrels for the same period.
Most of the API crude draw came in PADD 2, which includes Cushing, Oklahoma, the delivery point for crude oil traded against the Nymex contract. Concerns about lack of storage at Cushing have weighed on the market for the past two months. "Supply is still high at Cushing, but now there's some breathing room," said an analyst.
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