Published: Wed, January 09, 2019
Markets | By Otis Pena

Oil gains 2 percent, extending rally from December lows

Oil gains 2 percent, extending rally from December lows

Some analysts believe that this round of talks are unlikely to yield any fruit and fear the talks may go down to the wire, which is essentially the March 1 truce deadline agreed upon by U.S. President Trump and China's President Xi Jinping on December 1.

But looming over the OPEC-led cuts is a surge in US oil supply, driven by a steep rise in onshore shale drilling.

"The dynamics of oil prices in 2019 will also depend in large part on Opec's effectiveness in implementing the cuts, balancing the market and reinforcing the credibility of its signals", said the report. Meanwhile, crude oil output in the United States is expected to rise by a further 1mln barrels per day in 2019, with capacity constraints envisioned to ease in the second half of the year as new pipelines come onstream,"the WB says in the report".

"The market is clearly rebounding from sharply oversold territory", said Michael Tran, commodities strategist at RBC Capital Markets LLC.

Goldman downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 per barrel and cut its West Texas Intermediate (WTI) price view to $55.50 per barrel from $64.50.

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"Oil prices averaged $68 per barrel (bbl) in 2018, a touch lower than June forecasts but about 30% higher than in 2017", according to the report.

On Monday, investors also reacted to signs of contracting output by major oil producers, with Saudi Arabia indicating that it planned to reduce its crude exports by 800,000 barrels a day from around 7.9 million barrels a day in November — a move aimed at lifting prices above $80 a barrel, The Wall Street Journal reported , citing comments from OPEC officials. "They can be very convincing when they choose to be".

As of 13:57 Moscow time, Brent jumped 2.77% to $58.64 a barrel on London's Intercontinental Exchange. The global benchmark crude traded at an $8.61/bbl premium to WTI for the same month. The U.S. administration on January 7 expressed optimism it can reach a "reasonable" trade deal, and Trump has given Trade Representative Robert Lighthizer until March 1 to negotiate an accord.

"There a confluence of factors helping-a big driver is progress in trade talks and hopes that global growth will be supported", said Stephen Innes, head of trading for Asia Pacific at Oanda Corp.

American crude stockpiles probably declined by 2.7 million barrels last week, according to the median estimate in a Bloomberg survey of analysts ahead of government data on Wednesday. Nationwide inventories are near their lowest level in nearly two months.

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