Oil rises to $58.53; lifted by OPEC cuts, steadying stock market

Devin Lawrence
January 9, 2019

Brent crude futures rose 27 cents to settle at $57.33 a barrel, a 0.47 percent gain.

OPEC oil supply fell in December 2018 by 460,000 barrels per day (bpd) to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia. In fact, the continuous low price of oil is depicting a weaker economy of the world and the surging U.S. production.

Brent crude futures gained 69 cents, or 1.22 percent, to $58.02 per barrel by 1325 GMT.

Futures in NY increased as much as 1.9% following six days of gains, the longest streak of increases since July 2017.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading marginally higher on Tuesday after finishing mixed the previous session.

"Spot prices will continue to recover with Brent backwardation set to return by summer as inventories eventually revert to 5-year average levels".

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"Crude oil prices have benefited from OPEC production cuts and steadying equities markets", said Mithun Fernando, investment analyst at Australia's Rivkin Securities.

"Absent such a large slowdown, we expect prices to recover further, although growth uncertainty will likely require strengthening physical oil markets to drive this rally, with encouraging evidence that the OPEC cuts are starting".

Consultancy JBC Energy said it was likely that United States crude oil production was already "significantly above 12 million bpd" by early January.

Hoping to drive oil prices back up to $80 per barrel, Saudi Arabia is preparing deeper production cuts this month. The further trim of January's exports are expected to be felt mostly in the US market. "Maybe the pace of fluctuation was higher in the past weeks, but that is driven not only by market fundamentals; it's driven as well by geopolitics, trade wars, sanctions and many other things". To date, a 10 percent tariff is in still place on $200 billion worth of Chinese goods entering the USA, while that figure could increase to 25 percent with another $267 billion worth of additional Chinese goods levied if the two sides can't read a trade deal by their self-imposed March 2 deadline. -China trade tensions. The company's shares dropped 10 percent after the disclosure. Though it will enjoy a portion of support from the lower oil prices, the comprehensive economic growth across the world may slow down significantly, resulting in tumbling market conditions.

Societe Generale cut its 2019 oil price forecast for Brent by $9 to $64 a barrel and reduced its forecast for USA light crude by $9 to $57 a barrel.

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