Crude oil prices stabilized on Friday after China said it would hold talks with Washington on January 7-8 to resolve the trade dispute between the two countries. The futures on US crude oil with delivery in February rose by 1.38% to 47.74 USD per barrel, while Brent variety appreciated by 1.18%.
Both oil benchmarks are on track for solid gains in the first week of 2019 trading despite rising concerns about oversupply and delay of the global economy. The WTI crude oil started the week at 45.37 USD per barrel, while Brent oil was traded at 53.20 USD per barrel.
Both the most traded oil varieties earlier in the Asian session fell due to fears that the trade war between the US and China would lead to a slowdown in the global economy.
The traders explain today’s price stabilization with the news that came from the Chinese Ministry of Commerce. It was reported that representatives of the US Department of Commerce will meet with Chinese counterparts on January 7-8 in Beijing, as both sides want to end their dispute, which damages global economy and financial markets.
The two largest economies in the world have been in a trade conflict since last year, which has also been the cause of growing fears of slowing the global economy.
Meanwhile, late last night, it became clear that in December the expansion of industrial activity in the US slowed surprisingly to a two-year low as a result of the sharp weakening of new orders and production.
Despite the turbulence in global markets, the traders say that oil prices will receive some support from the OPEC production cuts.
The oil supplies by OPEC have shrunk by 0.46 million barrels per day between November and December to 32.68 million barrels per day. This is due to the beginning of Saudi Arabia’s production cuts and forced restraints in Iran and Libya.
OPEC, along with Russia and other non-cartel countries, agreed in December to cut supply by 1.2 million barrels per day compared to October 2018. OPEC’s share in the deal equals 800,000 barrels per day.
The focus now will be on whether producers deliver further curbs in January to implement the deal fully.
“If the agreement is followed, it will take 3-4 months to clear up the surplus stocks”, said the energy company FGE.
Given the projected layoffs and current US production growth, which has reached 11.7 million barrels per day at the end of 2018, FGE expects Brent’s prices to be in the range of 55-60 USD per barrel in the first months of 2019.
However, the growth in US oil production continues to keep the markets under pressure. The United States surpassed Russia and Saudi Arabia earlier in 2018 to become the largest crude oil producer in the world based on monthly data. The US crude oil production was at record levels in 2018, and in the December Short-Term Energy Outlook, EIA forecasted that 2018 annual crude oil production would reach 10.9 million barrels per day, surpassing the previous annual high of 9.6 million barrels per day set in 1970.
The US crude oil exports averaged 1.9 million barrels per day in 2018, about twice the amount that was exported in 2017. Crude oil overtook distillate as the largest US petroleum export.