Oil steady after hitting three-week high, Saudis to keep output below cap

KSA to supply 12m barrels crude to China’s Huajin in 2018 deal

FE Team | Published: February 26, 2018 21:22:07

LONDON, Feb 26 (Reuters): Oil steadied around its highest prices in three weeks on Monday, supported by comments from Saudi Arabia that it would continue to curb shipments in line with the OPEC-led effort to cut global supplies.
Brent crude was last down 8.0 cents on the day at $67.23 a barrel at 1005 GMT, after having risen almost 4.0 per cent last week in its largest weekly gain since late October.
US West Texas Intermediate crude for April delivery eased 5.0 cents to $63.50 a barrel after rising 3.0 per cent last week. Both contracts earlier rose to their highest since Feb 7.
A cold snap across Europe has encouraged some refiners to delay maintenance, which could support demand and help to put an end to a mild bout of profit-taking, analysts said.
"There is a bit of a bearish twinge to everything ... but we believe in the second half (of the year), you'll see demand pull the market back up again," Natixis oil analyst Joel Hancock said. "Our view is demand will be strong enough, but we don't see a big breakout. $60 to 70 is the range we're seeing for this year."
Prices did draw some support from Saudi Arabian oil minister Khalid al-Falih, who on Saturday said the country's crude production in January-March would be well below output caps, with exports averaging less than 7.0 million barrels per day.
Saudi Arabia hopes OPEC and its allies will be able to relax production curbs next year and create a permanent framework to stabilize oil markets after the current agreement on supply cuts ends this year, Falih said.
"A study is taking place and once we know exactly what balancing the market will entail, we will announce what is the next step. The next step may be easing of the production constraints," he told reporters in New Delhi.
Hedge funds and money managers upped their bullish wagers on US crude oil for the first time in four weeks, data showed on Friday.
A powerful 7.5-magnitude earthquake struck Papua New Guinea's Southern Highlands province early on Monday, the US Geological Survey (USGS) said, prompting oil and gas companies to immediately suspend operations in the energy-rich interior.
Meanwhile, Libya's National Oil Corp said on Saturday it had declared force majeure on the 70,000 bpd El Feel oilfield after a protest by guards closed the field.
Another report from Beijing adds: State-run Saudi Aramco has agreed to supply China's Huajin Chemical Industries Group Corp 12 million barrels of crude oil under an annual deal for 2018, up sharply from last year, three sources with knowledge of the deal said on Monday.
Although it's a fraction of Aramco's total supplies to China, the annual deal - the second of its kind between the top OPEC producer and the Chinese company - will help the Saudis boost its market share in the world's largest crude buyer in its race against Russia.
This year's supply to Huajin, a refinery and chemical complex controlled by Chinese defense conglomerate China North Industries Group Corp (Norinco), compare to an estimated 6-8 million barrels last year, according to two of the sources who spoke on condition of anonymity.
A Huajin spokesperson confirmed the 2018 volume but did not give further details of the supply deal. Press officials with Aramco Asia did not immediately comment.