Oil up for week on Libya woes, falling USA supply

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A section of the spending bill signed by U.S. President Donald Trump this month called for the sale of barrels from the Strategic Petroleum Reserve, an asset set up in the 1970s as part of a response to the oil embargo imposed on the United States by Arab members of the Organization of Petroleum Exporting Countries. Analysts initially had expectations that there would be an increase of 1.8 million barrels in the US weekly production.

The Energy Information Administration report on Thursday also showed that crude production ticked lower for the first time since early January, while supplies at the nation's biggest hub of pipelines and storage tanks in Cushing fell for a ninth straight week to the lowest level since 2014.

"This was the first decline in four weeks and came as USA refiners shunned imports", according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

Despite volatility and uncertainty in global markets, the oil price is holding up well.

Gasoline stockpiles rose by 300,000 barrels, and stocks of distillates declined by 2.4 million barrels.

Crude Oil WTI futures for April delivery were trading at $62.88 a barrel in Asia by 06:38 am GMT, up 0.18%.

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USA crude oil production was virtually unchanged last week at 10.27 million bpd, close to levels of top producer Russian Federation and more than OPEC-kingpin Saudi Arabia pumps.

"Oil prices and the S&P have been highly correlated, of late, with economic strength translating into improved company performance and higher energy demand", John Kilduff, partner at investment manager Again Capital in NY, told CNBC.

OPEC and 10 producers outside the oil cartel, including Russian Federation, first agreed in late 2016 to reduce crude output by 1.8 million barrels a day, in an effort to rein a supply glut that had dragged down prices since 2014. Thursday's EIA data showed exports of USA crude jumped to just above 2 million bpd, close to a record 2.1 million hit in October.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. USA crude fell 34 U.S. cents to US$62.43.

Overall total oil products demand is averaging a very healthy 20.6 million barrels per day, up by 4.3% from the same period past year. "That's why there's definitely a bullish narrative around the market right now".

Dollar-denominated commodities such as oil tend to have an inverse relationship with the US currency.

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