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Dec 20, 2016

MarketWatch | Oil: Oil Prices Jump With Supply Data in Sight; Natural Gas Tumbles

Carla Mozee, Mark DeCambre

Oil prices traded sharply higher Tuesday, and was headed for a third positive session in a row, ahead of a weekly supply update on crude inventories in the U.S.

West Texas Intermediate crude oil for February delivery CLG7, +1.06% the most active contract, rose 57 cents, or 1.1%, to $53.68 a barrel. The January contract CLF7, +0.86% which expires on Tuesday, moved up 50 cents, or about 1%, to $52.62 a barrel.
February Brent crude LCOG7, +1.55%  on London’s ICE Futures exchange added 90 cents, or 1.6%, to trade at $55.81 a barrel.
Trading volume is expected to be light this week in the run-up to the Christmas Day holiday.
Fawad Razaqzada, technical analyst at, said the market is trading on the belief that the Organization of the Petroleum Exporting Countries pact last month to cut output by 1.2 million barrels a day to a ceiling of 32.5 million will help stabilize prices.
“Now that the market has found some footing it is pushing higher in the anticipation of seeing a tighter oil market next year,” Razaqzada said. “Whether that anticipation will be met, the market will have to wait and see,” he said.
WTI oil finished Monday’s choppy session modestly higher, with geopolitical risks pushing up prices as some traders were forced to unwind bearish bets that oil futures would decline. During the trading session, Russia’s envoy to Turkey was shot and killed in Ankara during a gallery opening.
Then on Monday night, in what German authorities are calling a “probable terror attack,” a truck plowed into a popular Christmas market in Berlin, leaving at least 12 dead.
Oil prices are sensitive to geopolitical news as supplies are tighter in the wake of OPEC’s output agreement analysts said.
A weekly U.S. supply update is due from the trade industry group American Petroleum Institute at 4:30 p.m. Eastern time on Tuesday.
Russian ambassador to Turkey shot dead in Ankara
Andrey Karlov, Russia's ambassador to Turkey, was assassinated at an Ankara art gallery by a Turkish policeman who railed against Moscow's role in Syria’s bloody war. This video contains graphic content. Photo: Reuters
Expectations are for U.S. commercial crude oil inventories to have declined by a further 2 million to 3 million barrels last week, which would be “a near match with the prior week’s 2.6 million barrels draw,” wrote Citi energy futures analyst Tim Evans.
“However, we note that the anticipated decline would not necessarily impress given the comparisons to both a larger 5.9 million barrels drop in the same week of 2015 and a 4.2 million barrels five-year average draw,” he said.
Weekly inventory data by the U.S. Energy Information Administration will be released Wednesday.
Brent bets: Meanwhile, analysts at Commerzbank in a Tuesday note to clients highlighted data from ICE that speculative financial investors increased their net long positions in Brent by 22,600 contracts, to a record level of 451,500 contracts in the week to Dec. 13.
“The meeting at which OPEC and non-OPEC countries agreed on joint production cuts fell within this reporting week — in the wake of the meeting, the Brent price had achieved an 18-month high of just shy of $58 per barrel,” the analysts led by Eugen Weinberg wrote.
“In short, the latest price rise was driven by speculation to a major extent. There is therefore the risk of a price correction if the production cuts fall short of expectations early next year,” said Commerzbank.
Elsewhere in the energy market Tuesday, January reformulated gasoline RBF7, +1.98% rose 1.9% to $1.594 a gallon, while January heating oil HOF7, +0.43%  rose 0.5% at $1.678 a gallon.
Natural-gas futures for January delivery NGF17, -4.10%  shed 13 cents, or 3.7%, at $3.303 per million British thermal units.