Oil prices zip higher with Opec production cuts in focus
Oil on Monday continued its rise to mark an increase of more than 8 per cent since the beginning of the year as the market absorbs cuts in Opec production that come into force this month. The Financial Times reports in its article Financial Times в статье Oil prices zip higher with Opec production cuts in focus that Brent, the international benchmark, climbed as much as 3.3 per cent on Monday to reach $58.93 a barrel by late afternoon, continuing a trend which last week saw it book its largest weekly increase since mid-2017. West Texas Intermediate crude, the US benchmark, rose by more than 3 per cent on Monday to reach $49.61.
The rise comes as the market is torn between the price-boosting impact of supply cuts agreed by Opec in December and the dampening effect of concerns about a global economic slowdown, which last month caused prices to drop to 15-month lows.
“We’re rebounding from very weak levels and a lot of pressure at the end of last year,” said Olivier Jakob at Swiss oil consultancy Petromatrix. “The Opec cuts start now in January so you’re going into a period where Opec will manage supplies to tighten or balance the crude market. So, there is some repositioning from that, but you are also coming from very weak levels,” he added.
The oil price was hit in recent months as worries over the state of the global economy were fuelled by tensions between the US and China. The world’s two largest economies on Monday started their first formal talks since the beginning of a truce in their ongoing trade war.
Analysts at Energy Aspects said the downside risks of the trade dispute for the market were “large and difficult to quantify”, adding that China was “undoubtedly the biggest concern, especially given the weakness in the latest economic data”. But the beginning of the two day meeting on Monday contributed to a rally in global stock markets and sparked hopes that oil could continue its recovery.
Meanwhile seaborne exports from Opec fell by 320,000 barrels a day in December to 26.35m barrels, led by reductions from Saudi Arabia, Venezuela and the UAE. Any continued rise in price may be hampered, however, by the impact of continued addition of low cost US shale production onto the market, analysts said.
Goldman Sachs, one of the most influential banks in commodity markets, lowered its three and six month oil price forecasts to $62.5 a barrel and $67.5 a barrel, down from $70 previously respectively, citing the impact of new pipelines helping to “release the low-cost Permian basin into the global oil market”.