Oil prices increase as fears of tighter supply diminish
27 December, 2018, 06:41 | Author: Sally Reid
"The growth of the vehicle culture in China, and in India (where in October, pre-sanctions, India's crude oil imports rose to their highest level in more than seven years - and a series of record-breaking months for auto sales) will continue to take up whatever excess supply we see in the global market", Yastine said.
Oil in London dipped below $50 a barrel for the first time since July 2017 before recovering as the market turmoil and worries over US supply countered signs the OPEC+ coalition may extend or deepen output cuts.
The West Texas Intermediate for February delivery rose 3.69 USA dollars to settle at 46.22 dollars a barrel on the New York Mercantile Exchange, while Brent crude for February delivery increased 4 dollars to close at 54.47 dollars a barrel on the London ICE Futures Exchange.
The fourth-quarter price decline is likely to cause producers to throttle back on their output, he said.
Still, the macroeconomic picture and its impact on oil demand continue to pressure prices.
Sechin, an ally of Russian President Vladimir Putin and a critic of Opec, said the price slump was mostly linked to the United States rate hike announced last week.
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"What if the 1.2 million barrels of cuts are not enough?"
At the same time, an ongoing trade war between the US and China and the Federal Reserve's rate policy are causing concerns over global economic growth. The chance of another meeting by OPEC and its allies is "sending a signal to the market that they will do whatever it takes".
"I think there is a little bit of over-extension to the downside linked to global market fears".
Efforts by Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, to limit output beginning early next year by 322,000 barrels a day more than a previously announced cut of 250,000 barrels a day for six months starting in January, according to the Wall Street Journal had not adequately quelled concerns over supply to end 2018. Bloomberg quoted a Rakuten Securities analyst as saying, "There are several bearish factors in oil markets, and the situation won't improve anytime soon".
The benchmark Brent crude price slid to $49.93 on Christmas Eve after collapsing by more than 6pc under the weight of growing fears of a U.S. shale resurgence. The contract slumped $3.06 to $42.53 on Monday.
After recording its lowest weekly close since July 2017 at $45.40, the barrel of West Texas Intermediate failed to stage a meaningful recovery so far on Monday and was last seen trading at $45.35.
Brent for February settlement added $1.12/bbl to $51.59/bbl on the London-based ICE Futures Europe exchange after earlier dropping to as low as $49.93.
Investors around the world have grown increasingly pessimistic about the global economy's prospects over the next few years. Treasury Secretary Steven Mnuchin said Thursday that financial markets are overreacting too the Fed's rate hike this week.
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