Published: Thu, November 07, 2019
Markets | By Otis Pena

Crude Rises Again But Long-Term China Deal Still "Elusive", Says Analyst

Crude Rises Again But Long-Term China Deal Still

OPEC, the Organisation of the Petroleum Exporting Countries, said that the United States will overtake it in terms of crude oil output within the next five years.

US shale-oil output will climb more than 40% to reach 17 million barrels a day by 2025, or 3.1 million a day more than projected in OPEC's report past year.

Still, the cartel suggested that the market will be in a delicate state for the foreseeable future: in its 2019 World Oil Outlook published on Tuesday, OPEC said its production of crude and other liquids is expected to decline to 32.8 million barrels per day (bpd) by 2024, compared with 35 million bpd in 2019.

"There's lots of feel-good things with China and the USA saying they want to sign a partial deal, but looking beyond the headlines, what exactly are they saying about the removal of tariffs?" said Vandana Hari, founder of Vanda Insights, in a Bloomberg TV interview.

"There's nothing but bearishness in the EIA report", said Bob Yawger, director of futures at Mizuho in NY.

U.S. West Texas Intermediate (WTI) crude futures fell 21 cents, or 0.4%, from their last close to $57.05 per barrel.

Nationwide inventories are forecast to expand by 2 million barrels, according to a Bloomberg survey before Energy Information Administration data on Wednesday.

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Yet the findings of this latest report could make them consider whether the strategy is backfiring, by propping up investment in US shale drilling and perpetuating an oil oversupply. "Market participants will closely monitor if the build is confirmed by the EIA later today, considering that last week API had a crude draw and the EIA a crude build", said Giovanni Staunovo, oil analyst for UBS.

As a result, this year WOO has lowered its outlook numbers for global oil demand growth, to 104.8 million barrels per day (b/d) by 2024, and 110.6 million b/d by 2040.

"India is projected to be the country with the fastest oil demand growth and the largest additional demand, " the report said. The report is expected to show an 800,000-barrel build.

Middle East tensions offered some support, as Iran started to inject uranium gas into centrifuges at an underground nuclear facility, further distancing itself from a 2015 nuclear deal between Tehran and world powers.

In the report, OPEC said that 60% of the production growth is expected to come from the U.S., predominately from Alaska and the Gulf of Mexico, in the form of shale.

"This is just a huge wind at the back of the market now", Kilduff said. -China trade deal, is pushing up oil markets.

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