Mubasher: Oil prices edged up on Thursday, on the back of a drop in US crude inventories, with Beijing taking concrete actions to implement a trade war ceasefire with Washington.
In the same vein, oil prices were buoyed by the supply cuts announced last week by the Organization of Petroleum Exporting Countries (OPEC) and other allied producers, including Russia.
Nevertheless, the oil-exporter bloc downgrading its outlook for crude demand for the next year kept a lid on gains.
By 7:42 am GMT, US Nymex crude futures went up 0.12% to $51.21 per barrel (pb), while global benchmark Brent futures rose 0.28% to $60.32 pb.
US crude stockpiles fell by 1.2 million barrels in the week ended 7 December, versus forecasts of a drop of 3 million barrels.
“The agreement of a reduction in output of 1.2 million barrels per day [bpd] at last week’s OPEC meeting should see the market push into [supply] deficit in [first half of 2019],” Australia and New Zealand (ANZ) bank analyst Daniel Hynes told Thomson Reuters.
Moreover, China showed that it is willing to ease trade tensions with the US, as Beijing bought a substantial amount of American soybean imports for the first time in more than six months on Wednesday, mollifying investor concerns in stock markets, while boosting crude prices.
However, OPEC said that oil demand would drop to 31.44 million bpd in the next year, 100,000 bpd less than expected last November and 1.53 million bpd less than the current production level.
This fuelled further the concerns in the market that the decision of reducing production led by the producer club might not be sufficient to clear a glut or support oil prices.
This came amid worries by market watchers about the possibility of weaker macroeconomic growth, which could curtail any expansion in oil demand, according to analysts.
“If we do see a reduction in global growth risk, then we are monitoring increases in demand in combination with supply being absorbed,” Sydney-based Frame Funds portfolio manager Hue Frame told Reuters.
“There are so many moving parts at the moment that it is difficult to provide a convincing forecast,” Frame said, pointing to a major tailwind to prices going forward.
