Oil climbed by more than 1 percent on Wednesday, lifted by expectations that an OPEC-led supply cut announced last week for 2019 would stabilise markets as well as hopes that long-running Sino-American trade tensions could ease.
Disruptions to Libyan oil exports after local militia seized the country’s biggest oil field, El Sharara, were also buoying prices, traders said. International Brent crude oil futures were at $60.89 per barrel at 0212 GMT, up 69 cents, or 1.15 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $52.25 per barrel, up 60 cents, or 1.2 percent.
The higher prices came amid a broader increase in Asian stock markets after U.S. President Donald Trump told Reuters in an interview that trade talks with China were taking place to defuse the trade disputes between the world’s two biggest economies.
Core to oil markets was a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia last week to cut supply by 1.2 million barrels per day (bpd).
“OPEC production curbs will stabilise the market,” ANZ bank said on Wednesday.
Crude prices had lost a third of their value between early October and the announcement of the cuts.
Some analysts warn, however, that the agreement may not have the effect OPEC is hoping for.
Fereidun Fesharaki of energy consultancy FGE said in a note that the OPEC-led cuts would likely be “insufficient to mop up the inventories in the targeted three-month period till the end of the first quarter of 2019”.
As a result, FGE said prices were “likely to hover in the $55-60 per barrel range for Brent, with WTI sitting some $5-10 per barrel below this given current fundamentals”.
Fawad Razaqzada, market analyst at futures brokerage Forex.com, said “additional doubts were raised after the decision to reduce output was made on Friday, when … OPEC refused to specify which country would cut how much”.
Undermining the supply cuts is soaring output in the United States, where crude production has hit a record 11.7 million bpd.
The United States is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia, with the U.S. Energy Information Administration (EIA) saying on Tuesday that the nation’s annualized average output would be 10.88 million bpd over the year.
The 2018 output increase would be 1.53 million bpd, the EIA said, adding that it expected production to average an unprecedented 12.06 million bpd in 2019.
“U.S. oil production growth continues relentlessly and will probably continue for the foreseeable future to offset any supply-side adjustments from the OPEC+ group,” Razaqzada said.
Source: Reuters
