The Carlyle Group's Philadelphia Energy Solutions oil refinery in Philadelphia, US. Picture: REUTERS/DAVID M PARROT
The Carlyle Group's Philadelphia Energy Solutions oil refinery in Philadelphia, US. Picture: REUTERS/DAVID M PARROT

London — Oil prices steadied on Thursday, under pressure from high inventories but buoyed by a drawdown in US crude stockpiles and indications that the trade war between the US and China may be easing.

Global oil supply has outstripped demand over the past six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November.

But oil cartel Opec and other big producers, including Russia, agreed last week to reduce supply to try to trim the surplus.

Benchmark Brent crude oil was unchanged at $60.15 a barrel by 8.25am GMT. US light crude was down 5c at $51.10.

In a sign that China wants to lower trade tensions, the country made its first major US soybean purchases in more than six months on Wednesday. Investors breathed a sigh of relief across broader stock markets.

A drop in US crude stocks also boosted oil, which has been riding higher on expectations that the Opec-led planned output cuts will re-balance the market in 2019. US crude inventories fell by 1.2-million barrels in the week to December 7, compared with expectations for a decrease of 3-million barrels.

“The agreement of a reduction in output of 1.2 million barrels per day (bpd) at last week’s Opec meeting should see the market push into [supply] deficit in the first half of 2019,” ANZ analyst Daniel Hynes said. ANZ expects Brent to reach $75 a barrel in the first quarter of 2019.

Opec said on Wednesday that demand for its crude in 2019 will fall to 31.44-million bpd, 100,000 bpd less than predicted last month and 1.53-million bpd less than it currently produces.

A combination of factors, such as production cuts by Opec and non-Opec producers such as Russia, and further sanctions-related declines in Iranian exports are likely to keep markets tight in the first half of next year, Jefferies analyst Jason Gammel said.

“But ... US [production] growth will almost inevitably re-accelerate in the second half of 2019 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into over-supply,” Gammel added.

The US, where crude production has hit a record 11.7-million bpd, is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia.