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

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

Oil prices edged higher on Monday, rebounding further from 1-1/2-year lows reached in December, on support from OPEC production cuts and steadying equities markets.

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.

West Texas Intermediate Crude oil futures for February are up $1.44, or about 3%, at $49.40 a barrel.

"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said.

Looming over the OPEC-led cuts, however, is a surge in USA oil supply, driven by a steep rise in onshore shale oil drilling and production.

The aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by almost a fifth to over 11 million bpd in 2018.

The world's largest crude oil seller exported around 7.3 mbpd of crude in December and 7.9 mbpd in November, according to the report.

Still, U.S. oil supply is surging.

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Data released by the Energy Information Administration on Friday showed crude inventories in the US rose by 7,000 barrels in the week to December 28, beating expectations for a drop of more than 3 million barrels.

"The oil market continues to rally as the OPEC and non-OPEC production cuts are taking effect, reducing the oversupply situation that we've been seeing in the market", said Andrew Lipow, president of Lipow Oil Associates in Houston.

The API was also said to report that US crude inventories fell by 6.13 MMbbl last week.

"Surely, there will be more twists and turns in the saga and increasing US tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said.

U.S. Commerce Secretary Wilbur Ross said on Monday that Beijing and Washington could reach a trade deal that "we can live with" as dozens of officials from China and the United States held talks in a bid to end a trade spat that has roiled global markets since previous year. The dispute has weighed on economic growth, the Guardian reported.

S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $10 per barrel to $55 and $50 per barrel, respectively.

"We expect that the oil market will balance at a lower marginal cost in 2019 given: higher inventory levels to start the year, the persistent beat in 2018 shale production growth amidst little observed cost inflation, weaker than previously expected demand growth expectations (even at our above consensus forecasts) and increased low-cost production capacity", analysts including Damien Courvalin and Jeffrey Currie said.

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