Oil rises as China output drops, US inventories shrink

A slightly weaker dollar reinforced the strength in oil as well, traders said, as it makes fuel purchases cheaper for countries using other currencies. (Shutterstock)

Oil rose by around one percent on Wednesday, boosted by evidence of declining production in China and falling US inventories, while an upbeat OPEC statement on its planned output cut also supported the market.

A slightly weaker dollar reinforced the strength in oil as well, traders said, as it makes fuel purchases cheaper for countries using other currencies, potentially spurring demand.

Benchmark Brent crude futures were at $52.42 a barrel, up 74 cents on the day by 0922 GMT, while U.S. West Texas Intermediate (WTI) crude oil futures were up 73 cents at $51.02 a barrel.

Saudi Arabian Energy Minister Khalid al-Falih said on Wednesday that oil markets were at the end of a considerable downturn as fundamentals were improving and supply and demand were rebalancing.

He called on non-OPEC producers to help stabilise the market saying their role was as critical as the role of OPEC members.

Warning over fall in investments

Al-Falih, speaking at the Oil & Money conference in London, warned that the sector faces challenges due to the drop in investment.

“On the supply side, non-OPEC supply growth has reversed into declines due to major cuts in upstream investments and the steepening of decline rates,” the minister said.

“Without investment, that trend is likely to accelerate with the passage of time to the point that many analysts are now wending warning bells over future supply shortfalls and I am in that camp.”

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Last Update: Wednesday, 20 May 2020 KSA 09:49 - GMT 06:49
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