Bullish Traders Need Positive Trade Talk News to Sustain Rally

Crude Oil

The West Texas Intermediate for February delivery increased 0.56 USA dollar to settle at 48.52 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery rose 0.27 dollar to close at 57.33 dollars a barrel on the London ICE Futures Exchange.

The oil prices are drawing support from an agreed supply cut by OPEC, as well as some non-member countries such as Russian Federation and Oman.

The coalition of 25 OPEC and non-OPEC states, which came together for the first time in late 2016 to slash global oil supplies in order to reverse a three-year oil price slide, agreed last month to once again cut their collective output by 1.2 mmbbl a day in 2019 which should be sufficient to keep oil prices above US$60 a barrel this year, according to 74 per cent of those surveyed in the GIQ survey.

West Texas Intermediate for February delivery increased as much as 77 cents to $49.29 a barrel on the New York Mercantile Exchange, and traded at that level at 10:55 a.m.in London. Oil futures have gained more than 7 percent since last Monday.

Oil prices edged higher on Monday, rebounding further from 1-1/2-year lows reached in December, on support from OPEC production cuts and steadying equities markets.

Continuing to underpin the markets is optimism that the on-going OPEC-led supply cuts will trim the excess global supply and stabilize prices. "The Fed's easier stance and Opec's commitment to cut production as well as expectations that inventories should drop are lending a hand to this positive investor sentiment".

Consultancy JBC Energy said it was likely that US crude production was "significantly above 12 million bpd" by early January.

More news: India clinch historic first ever series on Australian soil

Crude oil prices climbed for a fifth session in a row to hit $58 yesterday, rallying from last December 2018's 18-month low, thanks to the production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and more stable equity markets.

Easing US-China trade tensions would underpin oil at current levels.

"Surely, there will be more twists and turns in the saga and increasing US tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said.

US Commerce Secretary Wilbur Ross said late on Monday that Beijing and Washington could reach a trade deal that "we can live with" as dozens of officials from the world's two largest economies held talks in a bid to end their trade dispute that has roiled global markets since previous year.

Goldman Sachs said in a note it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to "the strongest macro headwinds since 2015".

American crude stockpiles probably declined by 1.75 million barrels last week, according to the median estimate in a Bloomberg survey of analysts ahead of government data on January 9.

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