Oil rises to $51 after steep slide; growth fears weigh

Published: December 26, 2018
Email
OPEC and its allies including Russia decided earlier this month to return to policy of cutting production in 2019. PHOTO: REUTERS

OPEC and its allies including Russia decided earlier this month to return to policy of cutting production in 2019. PHOTO: REUTERS

LONDON: Oil rose to $51 a barrel on Wednesday on perceptions that a price slide to 2017 lows prompted by economic worries had been overdone amid an OPEC-led effort to tighten supply.

Crude has been caught up in wider financial market weakness as the US government shutdown, higher US interest rates and the US-China trade dispute unnerved investors and exacerbated worries over global growth.

Brent crude LCOc1, the global benchmark, was up $0.7 at $51.17 at 1120 GMT. It earlier fell to $49.93, the lowest since July 2017, and posted a 6.2% slide in the previous session.

US crude CLc1 was up $0.68 cents at $43.21.

After 57 years: Qatar to withdraw from OPEC, focus on gas exports

“I think there is a little bit of over-extension to the downside linked to global market fears,” said Petromatrix analyst Olivier Jakob. “It’s all about equities.”

“OPEC has shown it wants a higher price and is working towards that goal.”

Trade was thin due to the Christmas holidays. Asian stock markets retreated again on Wednesday.

While economic worries have weighed, the outlook is not as weak as in 2016 when a supply glut built up, because the Organization of the Petroleum Exporting Countries (OPEC) this time is trying to prop up the market, Jakob said.

Concerned that a new glut could form, OPEC and its allies including Russia decided earlier this month to return to a policy of cutting production in 2019, unwinding a decision taken in June 2018 to pump more oil.

OPEC, Russia agree to slash oil output

The producers’ alliance, known as OPEC+, plans to lower output by 1.2 million barrels per day (bpd), of which OPEC’s share is 800,000 bpd, next year, and some ministers have even suggested taking further action.

Stephen Innes, Head of Trading for Asia-Pacific at futures brokerage Oanda in Singapore, said some buying interest had returned after firmer trading in US equity futures.

But, he added, economic worries will continue to weigh unless OPEC reassures the market as to the viability of the supply cuts and “even imposes deeper ones as some members have suggested”.

Facebook Conversations

More in Business