An oil tanker at Jose refinery cargo terminal in Venezuela. Picture: REUTERS/JORGE SILVA/FILE PHOTO
An oil tanker at Jose refinery cargo terminal in Venezuela. Picture: REUTERS/JORGE SILVA/FILE PHOTO

London — Oil prices rose by 2% on Monday, extending a rally from December’s 18-month lows with support from Opec production cuts and steadying share markets.

Oil has gained nearly 12 percent since last Monday, its biggest week-on-week rally in two years.

Brent crude was up $1.13 at $58.19 a barrel by 9.40am GMT, rising from December’s slide below $50, its lowest level since July 2017. US crude rose 84c to $48.80 a barrel.

“Momentum is coming back into the market from very depressed price levels,” Petromatrix strategist Olivier Jakob said. “We’ve had five consecutive days of price gains already, so what you have today is a continuation of that.”

The oil prices are drawing support from an agreed supply cut by Opec, well as some non-member countries such as Russia and Oman.

Opec oil supply fell in December by 460,000 barrels a day, to 32.68-million barrels a day, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.

The aim of the production cut is to rein in a surge in global supply, driven mostly by the US, where production grew by nearly a fifth to more than 11-million barrels a day in 2018.

Record crude oil production has also pushed up US inventories, which rose by nearly 17% in 2018 to their highest in well over a year, according to weekly data by the Energy Information Administration (EIA) on Friday.

More upbeat equity markets also offered support on the back of expectations that this week’s trade talks between the US and China would ease a trade dispute.

The row has added to concerns about an economic downturn, which would hurt demand for oil.

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”.

Société Générale cut its 2019 oil price forecast for Brent by $9 to $64 a barrel and also reduced its forecast for US light crude by $9 to to $57 a barrel.