Oil prices edge up on trade talk hopes and OPEC cuts

Daniel Fowler
January 9, 2019

Brent crude futures rose 27 cents to settle at $57.33 a barrel, a 0.47 percent gain.

Oil futures have gained about 10 percent since last Monday.

U.S. West Texas Intermediate (WTI) crude oil futures (CLc1) settled up $1.26, or 2.6 percent, at $49.78 a barrel.

"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said.

OPEC oil supply fell in December 2018 by 460,000 barrels per day (bpd) to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.

On Monday, investors also reacted to signs of contracting output by major oil producers, with Saudi Arabia indicating that it planned to reduce its crude exports by 800,000 barrels a day from around 7.9 million barrels a day in November — a move aimed at lifting prices above $80 a barrel, The Wall Street Journal reported , citing comments from OPEC officials.

OPEC and its allies are trying to rein in a surge in global supply, driven mostly by the United States, where production surpassed 11 million bpd in 2018.

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Oil futures Tuesday finished higher for a seventh straight session, the longest run of gains in roughly 18 months, with prices lifted by global efforts to curb crude output, as well as measured optimism around U.S.

Record high crude oil production has also pushed up US inventories, which rose by almost 17 percent in 2018 to their highest in well over a year, according to weekly data by the Energy Information Administration (EIA) on Friday. In fact, the continuous low price of oil is depicting a weaker economy of the world and the surging United States production.

The API was also said to report that US crude inventories fell by 6.13 MMbbl last week. A resolution has widely been viewed as potentially supportive to crude prices because tariff spats have helped to hamstring expansion in the world's second-largest economy China, also one of the biggest importers of crude.

"Surely, there will be more twists and turns in the saga and increasing USA tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said. Though it will enjoy a portion of support from the lower oil prices, the comprehensive economic growth across the world may slow down significantly, resulting in tumbling market conditions.

The World Bank's January 2019 World Economic Outlook is titled "Global Economic Prospects".

"Crude oil prices have benefited from OPEC production cuts and steadying equities markets", said Mithun Fernando, investment analyst at Australia's Rivkin Securities.

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