Oil prices rise 2 per cent

Jeannie Matthews
January 4, 2019

Brent settled up 59 cents, or 1.1 percent, at $53.80 a barrel, while WTI settled 8 cents higher at $45.41 a barrel.

The producers' group now plans to cut 1.2 million barrels per day (bpd) beginning January 1.

Oil's beginning 2019 with the same price volatility that marked the end of previous year, as uncertainty over crude output and the health of the global economy keep investors wary.

Russian production hit a post-Soviet record in 2018, figures showed on Wednesday. Brent crude shed a total 20 percent in 2018 while West Texas Intermediate lost nearly 25 percent as shale boomers continue their relentless production growth despite pipeline bottlenecks in the Permian and shortages of frack crews that pushed up producers' costs. Saudi exports in December fell by about half a million barrels per day to stand at 7.253 million bpd, according to tanker-tracking data from Bloomberg.

Wall Street generally sees Brent bubbling back up to roughly $70 a barrel and WTI bouncing above $60.

The market, however, might still remain under some pressure from swelling production in the United States, which has emerged as the world's biggest crude producer this year, pumping 11.6 million bpd.

Oil markets dropped by around one per cent in 2019's first trading on Wednesday, pulled down by surging US output and concerns about an economic slowdown in 2019 as factory activity in China, the world's biggest oil importer, contracted.

West Texas Intermediate for February gained US$1.13, or 2.5 per cent, to US$46.54 a barrel on the New York Mercantile Exchange at settlement, recouping an earlier fall to near US$44.

Prices rose through most of the year, continuing 2017's recovery after several years of weak pricing that sent oil-rich economies into tailspins and forced hundreds of United States energy companies into bankruptcy. "If Trump gets over trade issues with China expect economic demand to surge", said Jonathan Barratt, chief investment officer at Probis Securities in Sydney.

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"The omens are far from encouraging", said Stephen Brennock of oil broker PVM, citing rising non-OPEC supply and the likelihood of further increases in oil inventories.

Oil prices ended with full-year losses for the first time since 2015, after a desultory fourth quarter that saw buyers flee the market over growing worries about a supply glut and mixed signals related to renewed U.S. sanctions on Iran.

"If the US government shutdown ends, it would ease the downward pressure on oil as investor sentiment will improve", said Kiwoom's Ahn. "Low gas prices are like another Tax Cut!" he wrote on his official Twitter account on Tuesday.

Independent market analyst Greg McKenna said in a note on Wednesday that it was "difficult for traders and investors to ignore what looks like a genuine global economic slowdown". Oil stockpiles at the US storage hub in Cushing have surged to the highest level since January, while nationwide inventories are near a one-year high, according to Energy Information Administration data.

What's worse for oil prices, however, is the fact that factory activity slowed down across all of Asia, not just in China.

But OPEC is hopeful the supply-cutting deal will work.

US light oil has become too cheap for Gulf Coast refiners to pass up.

This is published unedited from the PTI feed.

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