Oil rises above $57 on China-US January trade talks and Opec cuts
Opec supply cuts are also supporting oil prices as the API reports US crude stocks fell by 4.5-million barrels
London — Oil rose to above $57 a barrel on Friday after China said it would hold trade talks with the US and a survey showed China’s services sector expanded in December, while signs of lower crude supply also lent support.
Oil cartel Opec cut crude output in December, a Reuters survey showed, and the American Petroleum Institute (API) reported a 4.5-million barrel drop in crude inventories. Brent crude, the global benchmark, was up $1.40 at $57.35 a barrel at 2.23pm GMT. US crude oil was up 81c at $47.90.
“Recent Chinese data is not confirming the doom-and-gloom trend,” said Olivier Jakob, oil analyst at PetroMatrix. “And you’ve got Opec cutting.”
China’s services sector extended its solid expansion in December, a private survey showed on Friday, bucking a trend of downbeat economic data.
Both oil benchmarks are on track for solid gains in the first week of 2019 trading, despite rising concerns that the China-US trade war will lead to a global economic slowdown. But in comments that helped oil rally, China’s commerce ministry said it would hold vice-ministerial trade talks with US counterparts in Beijing on January 7-8.
The two nations have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and raising concern of slowing growth.
Despite the demand-side worries, oil has received some support as supply cuts announced by the global coalition of producers known as Opec+ kick in. Opec, Russia and other non-members agreed in December to reduce supply by 1.2-million barrels per day (bpd) in 2019. Opec’s share of that cut is 800,000 bpd.
The Reuters survey on Thursday found Opec supply fell by 460,000 bpd in December, following assessments by Bloomberg and JBC Energy also showing a sizeable decline.
The focus now will be on whether producers deliver further curbs in January to implement the deal fully. Iraq, a laggard in reducing production in the last Opec cutback, said on Friday it would stick to the new accord.
“The market is likely to take some comfort from the fact that crude oil production from Opec+ will continue to drop,” said Ole Hansen of Saxo Bank. “Sentiment, however, is weak with [US President Donald] Trump’s trade war with China a major hurdle.”