Oil price jumps to $58.53 on OPEC cut

Oil prices, yesterday, rose by about three per cent rebounding further from 1-1/2-year lows reached in December on support from the Organisation of Petroleum Exporting Countries (OPEC) production cuts and steadying equities markets.

Brent crude futures rose $1.47 to $58.53 a barrel, a 2.6 per cent gain, while U.S. West Texas Intermediate (WTI) crude futures rose $1.56 to $49.52 a barrel, a 3.3 per cent gain.

Oil futures have gained about 10 per cent since last Monday. “Momentum is coming back into the market from very depressed price levels,” Petromatrix strategist Olivier Jakob said.

Prices drew support from an agreed supply cut by the OPEC as well as some non-member countries such as Russia and Oman.

OPEC oil supply fell in December by 460,000 barrels per day (bpd) to 32.68 million bpd, a development attributed to the cut in oil output by top exporter Saudi Arabia.

OPEC and its allies are trying to rein in a surge in global supply, driven mostly by the United States, where production surpassed 11 million bpd in 2018. Record high crude oil production has pushed up U.S. inventories.

In a related development, 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.

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U.S. crude inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape.

Shares have risen on expectations that trade talks this week between the United States and China will ease a trade dispute. Disruptions to trade undermine prospects for economic growth and oil demand.

Goldman Sachs said in a note it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to “the strongest macro headwinds since 2015”.

Societe Generale cut its 2019 oil price forecast for Brent by $9 to $64 a barrel and reduced its forecast for U.S. light crude by $9 to $57 a barrel.