WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures moved higher for a fourth consecutive session, while posting sharp weekly gains of 5% or more in morning trading, supported by steep production cuts by the Organization of the Petroleum Exporting Countries and receding concerns over global trade war.
Ahead of the three-day holiday weekend, NYMEX March West Texas Intermediate futures were up $0.83 at $55.24 per barrel (bbl), with ICE Brent futures $1.06 higher near $65.63 gallon. March ULSD contract gained 2.8 cents to $2.00 while RBOB futures rallied 3.79 cents to near $1.5464 gallon.
Oil futures were boosted by a report of a partial production shutdown in the world's largest offshore oilfield located in the Persian Gulf in Saudi Arabia water. According to the Reuters report, the Safaniya field, with the combined capacity of 1.0 million barrels per day (bpd) was partially shut after the main power cable was severed by a ship's anchor about two weeks ago. It is unclear how much production has been shut-in, and when the oilfield would return to full rates.
The news of the unintended production loss added upward pressure on rallying oil futures following the earlier week comments by Saudi Arabia Energy Minister Khalid al-Falih that the kingdom's output would drop to 9.8 million bpd in March, well below the 10.311 million bpd under the OPEC+ agreement.
The steep cut illustrates the Saudis' determination to support oil prices through aggressive production cuts. The Saudi policy of curtailing production was also evidenced in the latest International Energy Agency report that showed crude production from OPEC plunged 930,000 bpd in January to a nearly four-year low at 30.83 million bpd with Saudi output down 350,000 bpd to 10.213 million bpd.
Markets were also lent support by reports U.S.-China trade talks would continue next week in Washington after conclusion of this week's discussions in Beijing, with China's president, Xi Jinping, indicating significant progress was made. Progress in negotiations comes ahead of a March 1 deadline to reach a deal before U.S. tariffs on $200 billion of Chinese imports increase from 10% to 25%, although U.S. President Donald Trump this week said he was flexible, and would extend the deadline by 60 days if there was progress in the talks.
In the United States, Federal Reserve data released this morning showed a sharp drop in both industrial output and manufacturing for the first month of year. Industrial output in the United States was reported down 0.9% in January following 0.3% monthly gain in December, while manufacturing production slid 0.9% following a 1.1% surge in December.
The University of Michigan this morning reported consumer confidence increased to a more than expected 95.5 in its survey, up from 91.2 in January, with the market anticipating the preliminary February reading would be 93.0.
Liubov Georges can be reached at firstname.lastname@example.org
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