Oil price rally stretches a supplies tighten

Oil price rally stretches a supplies tighten

Both benchmarks have rallied more than 16 percent since hitting a low point in late December. If the worst can be avoided, there is a lot more room to the upside for crude prices, particularly since oil traders have grown pessimistic about the fate of the global economy.

Goldman downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 per barrel and cut its West Texas Intermediate (WTI) price view to $55.50 per barrel from $64.50.

Oil rallied for a seventh day as US negotiators touted progress in trade talks with China and investors gained faith that OPEC will shrink output.

Beyond politics, oil markets are being supported by supply cuts started late a year ago by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russian Federation.

However, despite Trump's intervention, oil has gained almost 12 per cent since last Monday, its biggest week-on-week rally since early December 2016.

Worldwide benchmark Brent oil traded at $57.28 per barrel at 0620 GMT for a daily loss of 0.5 percent, after ending Monday at $57.56 a barrel.

Brent crude futures for February are up $1.71, or 3%, at $58.76 a barrel.

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The rise came as China and the United States sit down together in Beijing today. Data showed that stockpiles at Cushing, Oklahoma, a key delivery hub for USA crude futures, decreased by 565,000 barrels from December 3 to December 4, according to Genscape, a US global commodity and energy markets intelligence firm.

Today's early price action suggests investors are pricing in bullish news from the trade talks.

"There a confluence of factors helping - a big driver is progress in trade talks and hopes that global growth will be supported", said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. The current round of talks are scheduled to continue through Tuesday, with more senior-level discussions likely this month.

OPEC, led by Saudi Arabia, alongside other producers led by Russian Federation, agreed a year ago to rein in supplies starting from January after oil tumbled from above $86 on worries about surging output.

Meanwhile, American crude stockpiles probably declined by 1.75 million barrels last week, according to a median estimate in a Bloomberg survey of analysts ahead of government data on Wednesday. Nationwide inventories are near their lowest level in nearly two months.

Saudi Arabia is planning to lower its crude oil exports to around 7.1 million barrels per day (mbpd) by the end of January to help boost oil prices above $80 a barrel, The Wall Street Journal reported OPEC officials as saying on Monday.

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