HOUSTON (Reuters) – Oil prices edged higher on Monday, the last day of 2018, but were en route for their first annual drop in three years as fears of a slowing global economy and emerging supply glut outweighed impending OPEC-led production cuts.

Brent crude futures were up 21 cents at $53.42 a barrel by 1:28 p.m. EST, while U.S. West Texas Intermediate (WTI) crude futures were 10 cents higher at $45.43 a barrel.

Both oil benchmarks were down more than a third this quarter, the steepest decline since the fourth quarter of 2014.

In 2018, WTI has lost more than 25 percent, while Brent was down by more than 21 percent.

The year began with optimism that a years-long glut was tamed, pushing Brent to more than $86 a barrel in October, and ended with sharp drop on worries that soaring output would overwhelm 2019 demand.

The Organization of the Petroleum Exporting Countries and other producers including Russia, known collectively as OPEC+, opened their taps in autumn as demand reduced global inventories, then reversed course as priced tumbled.

The producers’ group now plans to cut 1.2 million barrels per day (bpd) beginning Jan. 1. It acted as fears a U.S.-China trade war, falling U.S. stock prices and rising U.S. shale output and interest rates would hurt global demand pushed crude lower.

“We’re flush with oil,” said Phillip Streible, senior market strategist at RJO Futures. “OPEC is out there cutting, but the market isn’t really pricing that in.”

A tweet by U.S. President Donald Trump claiming progress on a possible U.S.-China trade deal pushed crude prices up more than 2 percent in early trading on Monday. But oil lost ground and edged lower as traders focused to data showing China’s economy slowed further in December, analysts said.

Chinese manufacturing activity declined in December for the first time in more than two years, with the Purchasing Manager’s Index (PMI) falling to 49.4, a sign of contraction, a National Bureau of Statistics (NBS) survey showed.

Analysts also were bearish on 2019, according to a Reuters poll. A survey of 32 economists and analysts forecast an average Brent price of $69.13 next year, compared with $71.76 in 2018.

The global benchmark rose by almost a third between January and October, to a high of $86.74. That was the highest level since late 2014, the start of a deep market slump amid bulging global oversupply.

Prices rose through most of the year, continuing 2017’s recovery after several years of weak pricing that sent oil-rich economies into tailspins and forced hundreds of U.S. energy companies into bankruptcy. Renewed U.S. sanctions against major producer Iran, as well as healthy economic conditions and concerns about crude supplies, had elevated crude until October.

However, when Washington gave unexpectedly generous sanction waivers to Iran’s biggest oil buyers, concerns about a global oversupply and sluggish economic growth clouded markets.

“OPEC and non-OPEC producers found themselves competing with additional supplies from the U.S. that overwhelmed the market,” said Andy Lipow, president of Lipow Oil Associates in Houston.

The United States, which broke its 1970 peak of 10.04 million bpd in November 2017, became the world’s top producer in 2018, hitting an all-time high of more than 11.5 million barrels per day (bpd) in October, the U.S. Energy Information Administration said.

Prices could stagnate for weeks until OPEC’s cuts begin to impact global supplies in mid-January and early February.

U.S. drillers added about 138 oil rigs in 2018, the second year in a row of boosting the rig count. But North American producers will likely begin to reduce spending on drilling in 2019 as prices fall below break-even levels for new wells in the Permian Basin and the Eagle Ford shale field in Texas, analysts said.

“You could have a meaningful rally,” said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. “More companies are reducing capital expenditures, and production probably isn’t going to go as high as forecast.”

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