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Oil Prices Continue Rally from December Lows

Oil prices were up more than 2 percent on Monday as outputs cuts by the Organization of the Petroleum Exporting Countries (OPEC) and stable stock markets helped continue a rally from last month’s 18-month lows.

International benchmark Brent crude gained 1.8 percent to $58.09, having climbed 2.3 percent to $58.38 per barrel earlier in the session.

Brent recovered from December’s fall below $50, its weakest level since July 2017.

US West Texas Intermediate (WTI) crude added 2.5 percent to $49.15 per barrel, before easing at $48.84.

Since last Monday, oil prices have climbed almost 12 percent to mark its highest week-on-week rally in two years.

Oil analyst Olivier Jakob stated that momentum is coming back into the market from very depressed price levels. There have been five consecutive days of price gains already, so what people are seeing today is continuation of that, he added.

OPEC Cut, Stock Market Optimism

The price boost was mainly driven by the agreed production cut by the OPEC, along with some non-OPEC countries including Russia and Oman.

Survey from a UK news agency showed last week that OPEC oil supply declined in the previous month by 460,000 barrels per day (bpd) to 32.68 million bpd, with Saudi Arabia leading the reductions.

The output cut was implemented in an effort cap the buildup of global supply, driven mostly by the US, where production rose by nearly a fifth to over 11 million bpd in 2018.

A German bank said if compliance by OPEC and the allied non-OPEC countries is similarly high as in the agreement two years ago, the oil market is likely to be rebalanced during the first half year.

Data from the Energy Information Administration released on Friday also showed record crude oil production has helped boosts US inventories, which almost climbed 17 percent last year to their highest in well over a year.

More upbeat stock markets also added support on the back of expectations that trade negotiations scheduled this week between the US and China will help resolve a trade conflict.

The trade spat added to fears about an economic decline, which would hit the demand for oil.

A US investment bank stated that it had lowered its average Brent crude oil forecast for this year to $62.50 a barrel from $70 because of the strongest macro headwinds since 2015.

A French investment bank revised its 2019 oil price forecast for Brent by $9 to $64 per barrel and cut its forecast for US WTI crude by $9 to $57 a barrel.

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Monday, 07 Jan, 2019 / 3:00

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