Oil rises 1 percent on supply cuts, but gloomy economic outlook caps gains
SINGAPORE (Reuters) – Oil prices rose by 1 percent on Tuesday amid supply cuts by producer club OPEC and Russia, although analysts said much bigger gains were unlikely because of a darkening economic outlook capped gains.
International Brent crude oil futures LCOc1 were at $59.62 per barrel at 0133 GMT, up 63 cents, or 1.1 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.01 per barrel, up 50 cents, or 1 percent, from their last settlement.
“The impact of OPEC+ (OPEC and others including Russia) cuts, Iran sanctions and lower month-on-month growth in U.S. production should help to support oil prices from current levels,” U.S. bank J.P. Morgan said in a note.
The Middle East dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, agreed in late 2018 to cut supply to rein in a global glut.
Meanwhile, the United States last November re-imposed sanctions against Iran’s oil exports. Although Washington granted sanctions waivers to Iran’s biggest oil customers, mostly in Asia, the Middle Eastern country’s exports have plummeted since.
While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the United States C-OUT-T-EIA hit a record 11.7 million barrels per day (bpd) late last year.
The surging output increasingly allows U.S. oil producers to export crude, including to top importer China.
Three cargoes of U.S. crude are currently heading to China from the U.S. Gulf Coast, the first departures since late September and a 90-day pause in the two countries’ trade war that began last month.
The tankers are scheduled to arrive at Chinese ports between late January and early March, according to shipbrokers and vessel tracking data.
Looming over oil and financial markets, however, is an economic slowdown.
Tuesday’s oil price increases came after crude futures fell by more than 2 percent the previous session, dragged down by weak Chinese trade data which pointed to a global economic slowdown.
“Given the heightened macro risk anxiety, any support from supply-side correction could be limited,” J.P. Morgan said.
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