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Oil extends losses as Kuwait nears deal with Saudis on output

Oil extends losses as Kuwait nears deal with Saudis on output

Oil is up about 9 per cent this month after the US and China struck a preliminary trade pact and the OPEC + group agreed to deepen output cuts

Oil extended losses after the biggest decline in three weeks as Kuwait signaled a deal with Saudi Arabia to renew crude output along their border and as U.S. shale explorers increased drilling.

February futures dropped 0.4 per cent in New York after falling 1.2 per cent on Friday, the most since Nov. 29. The shared neutral zone, which has been shut for at least four years due to disputes between the two countries, can produce as much as 500,000 barrels a day. US explorers last week boosted drilling by the most in almost two years, according to data from Baker Hughes Co. on Friday.

Oil is up about 9 per cent this month after the US and China struck a preliminary trade pact and the Organization of Petroleum Exporting Countries and its allies agreed to deepen output cuts. Hedge funds increased bullish bets in the week ended December 17 to the highest level in more than seven months on rising crude prices, according to data released Friday.

“Oil prices will continue to benefit from positive developments in the U.S.-China trade,” Stephen Innes, a market strategist at AxiTrader, said in a note. “The seasonal demand slowdown in the first quarter could be an issue for this bullish view.”

Brent for February settlement fell 14 cents, or 0.2 per cent, to $66 a barrel on the ICE Futures Europe Exchange. The contract fell 40 cents to close at $66.14 on Friday. The global benchmark crude traded at a $5.78 premium to WTI.

Resuming output at the Wafra and Khafji oilfields in the neutral zone depends on a political decision and a final agreement, Kuwait’s Oil Minister Khaled Al-Fadhel said on Sunday. Even if production resumes, the area wouldn’t add oil to global markets because both nations adhere to OPEC supply limits, a person familiar with Saudi thinking said in October.

Working oil rigs in the U.S. increased by 18 last week to 685. In the Permian Basin of Texas and New Mexico, drillers deployed 15 additional rigs, wiping out several weeks of declines.

Other market drivers

* Declining investment in oil production during several years of a global glut means fewer new projects boosting output are likely to start up in 2020, according to Bahrain’s energy minister.

* The global oil market is in “excellent” condition, according to United Arab Emirates Energy Minister Suhail Mohammed Al Mazrouei.

* Crude futures fell 0.7 per cent to 476.8 yuan a barrel on the Shanghai International Energy Exchange.

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