Oil prices bounce amid Russia's output cut, Lybia's production shutdown

After a dramatic summit of OPEC and non-OPEC members over the weekend that triggered an immediate boost in oil prices, the commodity has already dropped back to pre-meeting levels, falling 3.1 percent by the end of Monday.

Qatar plans to leave OPEC in 2019 but, for now, remains in the OPEC group in the forecasts. -China trade tensions could undermine oil consumption next year, as growth in supply gathers pace.

"The oil market is regaining further ground this morning in the wake of a bullish API report concerning us oil stockpiles", said Stephen Brennock, an analyst at PVM Oil Associates Ltd.in London. It settled at $52.15 a barrel on Wednesday. Prices increased 65 cents to $51.65 on December 11, after posting a 3.1% drop in the previous session.

Earlier this month, OPEC and non-member countries convened in Vienna, with Russian Federation agreeing to cut back on oil production by as much as 1.2 million barrels a day in a bid to stabilise prices.

OPEC cuts: sufficient or not?

USA light crude was steady at $51.15. -China trade war, political uncertainty over the U.K.'s Brexit procedure, and record production of USA shale oil.

Imports of crude oil have been declining while exports of crude oil and petroleum products have been rising. They pledged to lower output by 1.2 million bpd, of which OPEC's share is 800,000 bpd.

The reduction is needed because oil demand growth is slowing.

USA based Capital Economics, meanwhile, sees an average of $63 a barrel over the course of 2019.

US crude inventories USOILC=ECI fell by 1.2 million barrels in the week to December 7, disappointing some investors who had expected a decrease of 3 million barrels. Richard Robinson, manager of Ashburton Global Energy Fund, believes the current dip is "transient" and that oil will recover to between $70 and $80 in the next three months, he wrote in a note earlier this month. Gasoline stockpiles climbed by 2.1 million barrels last week, while distillate stockpiles declined by 1.5 million barrels, according to the EIA.

The International Monetary Fund and the Organisation for Economic Cooperation and Development expect the global economy to expand more slowly next year than forecast six months ago. "If the market needs to see stockdraws first, it could be a couple of months".

Meanwhile, the Organisation of the Petroleum Exporting Countries (OPEC) said 2019 demand for its crude would fall to 31.44 million barrels per day, 100,000 bpd less than predicted last month and 1.53 million less than it now produces.

  • Wendy Palmer