Published: Thu, December 27, 2018
Business | By Pearl Harrison

Oil prices inch up, but concern over demand limits gains

Oil prices inch up, but concern over demand limits gains

Continued growth in US crude production, notably by shale-oil producers, also has contributed to worries about a growing glut worldwide.

OIL in London fell below $50 a barrel for the first time since July 2017 as broader financial market turmoil and worries over U.S. supply countered signs the Opec+ coalition may extend or deepen output cuts.

USA crude oil prices jumped 3.5% to $44.04 per barrel after plunging 6.7% on Christmas Eve.

The fourth-quarter price decline is likely to cause producers to throttle back on their output, he said. EOG Resources (EOG), a big US shale producer, was flat. However, the market seems to be ignoring this move as oil prices are continuously falling in the worldwide market despite this production cut.

"The demand outlook continues to be called into question".

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

The US-China trade dispute and the prospect of a rapid rise in US interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

Brent fell 11 per cent last week and hit its lowest level since September 2017, while United States futures slid to their lowest level since July 2017, bringing the decline in the two contracts to more than 35 per cent for the quarter.

"The main input over the weekend has been the continued intervention by OPEC members", said Olivier Jakob, managing director at Petromatrix.

Opec and its allies, including Russian Federation, decided earlier this month to cut production in 2019, unwinding a June decision to pump more oil. "For now, those statements are ignored by the market because we are in this bearish cycle".

West Texas Intermediate crude for February delivery climbed $1.51/bbl to $44.04/bbl at 9:50 a.m. on the New York Mercantile Exchange. Total volume traded Monday was about 42 percent below the 100-day average ahead of the Christmas holiday Tuesday. They slumped 6.7% in the previous session to US$42.53 a barrel, the lowest since June 2017.

Brent for February settlement added $4 to settle at $54.47 a barrel on the London-based ICE Futures Europe exchange after earlier dropping to as low as $49.93, the first time the benchmark has dipped below $50 a barrel since July 2017.

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