International Desk: Oil prices climbed on the last trading day of the year on Monday, mirroring gains in stock markets, but were on track for the first yearly decline in three years amid lingering concerns of a persistent supply glut.
Hints of progress on a possible US-China trade deal helped bolster sentiment, which has been battered by concerns over a weaker global economic outlook.
Brent crude futures – the international benchmark for oil prices – rose 56 cents, or 1.1 percent, to $53.77 a barrel by 0420 GMT. Brent declined nearly 20 percent in 2018 following two years of growth.
US West Texas Intermediate (WTI) crude futures were at $45.77 a barrel, up 44 cents, or 1 percent, from their last close. WTI is down about 24 percent this year.
Crude prices have been closely tracking equity markets during volatile trading for both asset classes last week.
“Investors are looking for bargains in an illiquid market (today) … If Trump gets over trade issues with China expect economic demand to surge,” said Jonathan Barratt, chief investment officer at Probis Securities in Sydney.
US President Donald Trump said he had a “very good call” with Chinese President Xi Jinping and that a possible trade deal between the United States and China was progressing well.
“China is still the best bet for global economic growth. Anything that severely pinches China will inevitably hurt global growth and, as a consequence, oil consumption,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
The current downward pressure on oil prices should likely taper off from January, when OPEC-led supply cuts commence, analysts said.
Earlier this month, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed to curb output by 1.2 million barrels per day starting in January to clear a supply overhang and prop up prices.
The group of producers “may hold out on supplies longer than reasonable in order to see if they can effect a rally similar to September-October this year,” Vijayakar said.
Brent hit a four-year high of $86.29 a barrel on Oct. 3 and has fallen about 38 percent since then.
While a gentle recovery is expected for prices in the first quarter 2019, the market might still remain under pressure from swelling production in the United States, which has emerged as the world’s biggest crude producer this year.
US shale production levels would be one of the primary drivers of crude markets going forward, said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures.
The market direction might get dictated if US shale producers disregard bearish signals in oil prices and push for higher output next year, Jiaxuan said.
Energy companies in the United States added two oil drilling rigs in the week to Dec. 28, bringing the total count to 885. That was up from 747 a year ago.
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