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

09 January, 2019, 15:55 | Author: Mary Valdez
  • Goldman cuts 2019 crude price view; sees recovery from current levels

Brent crude, the global benchmark, was trading 2.5 per cent up at $58.60 a barrel last night as officials from the two countries began talks yesterday.

Goldman Sachs downgraded its 2019 crude oil price view, but forecast a recovery from present levels in the absence of a "large" global economic slowdown and improving fundamentals along with signs of major producers trimming their production.

Oil prices have also been receiving support from supply cuts started at the end of 2018 by a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russian Federation. The U.S. administration on Monday expressed optimism it can reach a "reasonable" trade deal, and Trump has given Trade Representative Robert Lighthizer until March 1 to negotiate an accord. That wrong-footed OPEC with Saudi Arabia and Russian Federation both pumping more than 11 million b/d at that time in a bid to offset the risk of lost Iranian barrels and left the market awash with crude.

The market has anticipated that talks between Chinese officials and the US trade representatives that began on Monday would yield positive results, as smooth global trade would help encourage oil demand. Both WTI and Brent oil are in a bear market, usually defined as a drop of at least 20% from a recent peak. Oil refiners in the world's top crude-importing region are racing against the clock to restart and ramp-up purchases from Iran before U.S. President Donald Trump has a chance to change his mind. The CEO of Qamar Energy, the energy consulting organization has also stated that the most prominent factor on the demand side is the economic outlook. Most investment banks see strong price gains in 2019, even if many of them do not see WTI and Brent returning to the highs seen last October.

Goldman cuts 2019 crude price view; sees recovery from current levels
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Aside from the U.S. Meanwhile, the USA and China resumed trade negotiations this week, widely seen as a small sign of a thaw in the trade war.

"Saudi Arabia will continue to be the decisive factor for the markets this year, just as they were last year", said Mr Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. "Stripping out Qatar, which exited OPEC at the end of the month, and Iran, Libya and Venezuela, which were granted exemption from the latest round of cuts, the remaining 11 members pumped 26.89 million b/d-almost 1 million b/d above their collective ceiling of 25.94 million b/d, which went into effect January 1", the survey showed. Gasoline stocks rose by 6.9 million barrels, more than thrice the expected increase.

February natural gas NGG19, +0.98% settled at $2.967 per million British thermal units, up 0.8%, after a 3.3% drop on Monday.

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