Oil prices edge up on hopes global supplies will tighten

Oil prices edge up on hopes global supplies will tighten

Oil prices rose on Thursday, buoyed by a drawdown in USA crude inventories and signs that China is taking more concrete steps to put a trade war truce with Washington into action.

Oil prices fell 4 percent on Tuesday, dropping for a third consecutive session as reports of swelling inventories and forecasts of record us and Russian output combined with a sharp sell-off in global stock markets. "The decline in oil over the last month or two has been shocking to the market", said Lindsey Bell, investment strategist at CFRA. The global benchmark crude traded at an $8.33-a-barrel premium to WTI for the same month.

UBS forecasts USA crude oil will climb back to $73 a barrel by mid-2019, as supply cuts offset lower demand due to the slowing economy.

"Global oil demand projections have been left unchanged for 2019, as the impact of lower prices is offset by the slight downward revision to gross domestic growth and significant downward revisions to demand in Turkey and Venezuela", the IEA said.

"A large part of the move (lower) is due to a broader market sell-off, with both US and Asian equity markets coming under pressure", said commodities strategist Warren Patterson at Dutch bank ING in Amsterdam. That followed a almost 11 per cent drop in October.

"The energy complex is drifting lower as sellers continue to bask in the bearish afterglow of yesterday's (U.S.) stats", PVM Oil analyst Stephen Brennock said. -China trade war, political uncertainty over the U.K.'s Brexit procedure, and record production of US shale oil.

Opec, which pumps more than a third of the world's crude, is grappling with an oil glut because of record United States production, tepid global demand as major economies slow down and the U.S. granting of waivers to countries importing oil from sanctions-hit Iran. January crude was up 41 cents, or 0.8%, at $52.06 a barrel on the New York Mercantile Exchange.

A combination of factors such as production cuts by OPEC and non-OPEC producers such as Russian Federation and further sanctions-related declines in Iranian exports are likely keep markets tight in the first half of next year, Jefferies analyst Jason Gammel said. But Goldman Sachs has a much darker forecast, expecting the U.S.to slow down to less than 2 percent by the end of next year, one of its senior strategists told CNBC on Monday. Brent is trading around $60 as of December 12.

"There are a number of factors to suggest the cuts were deep enough, that we will start to see a resumption to the upside in oil prices, but certainly we don't see oil prices moving up to the $90, $100 level that maybe we could've seen", the analyst said, adding, "We think that the only certainty is uncertainty at the moment". WTI was at $51.55, up roughly half a percent.

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