Oil prices set for biggest rise since 2016
Published : Tuesday, 31 December, 2019 at 4:48 PM Count : 162
Oil prices steadied on the last trading day of the decade on Tuesday and were on track for a monthly and annual gains, supported by a thaw in the prolonged U.S.-China trade dispute and Middle East unrest.
Brent crude LCOc1 was up 9 cents at $66.76 a barrel by 0941 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 was down 2 cents at $61.66 per barrel, Reuters reports.
The volume of trade remained low as many investors were away for year-end holidays.
Brent has gained about 24% in 2019 and WTI has risen 35%. Both benchmarks are set for their biggest yearly gains in three years, backed by a breakthrough in U.S.-China trade talks and output cuts pledged by the Organization of Petroleum Exporting Countries and its allies.
Signs of progress in the talks between Washington and Beijing and likelihood of signing a trade deal as early as next week boosted factories’ output and Chinese manufacturing activity expanded for a second straight month.
China’s Purchasing Managers’ Index (PMI), an index that shows economic trends in the manufacturing and service sectors, was unchanged at 50.2 in December from November, but still remained above the 50-point mark that separates growth from contraction.
Also supporting the prices were rising tensions in the Middle East as thousands of protesters and militia fighters gathered outside the U.S. embassy in Baghdad to condemn U.S. air strikes against Iraqi militias.
The U.S. ambassador and other staff have been evacuated out of security concerns. The U.S. strikes could pull Iraq further into the heart of a proxy conflict between the United States and Iran.
Looking ahead, U.S. crude inventories are expected to fall by about 3.2 million barrels in the week to Dec. 27, potentially its third consecutive weekly decline, a preliminary Reuters poll showed on Monday.
“Oil prices, though largely expected to trade positive, will face headwinds from subdued global growth momentum and robust U.S. shale output levels in the first quarter (of 2020),” said Benjamin Lu, analyst at Phillip Futures.
Prices are likely to remain rangebound in 2020 as swelling supplies, particularly from the United States, offset cuts from the Organization of the Petroleum Exporting Countries and weakening worldwide demand, brokers and analysts said.
The U.S. Energy Information Administration expects average crude oil prices will be lower in 2020 than in 2019 because of rising inventories. Outside the United States, production is expected to continue to grow in Brazil, Norway, and Guyana.