Oil Rises to Near Two-Week High
(Bloomberg) -- Oil increased in New York as worries over signs of slower economic growth in China were countered by OPEC’s production cutbacks.
Futures rose to near $47 a barrel, approaching the highest settlement level during the last two weeks. Crude initially fell as much as 2.6 percent as Apple Inc. cited an unforeseen slowdown in China and cut its sales outlook, just days after data showed weakening factory conditions across Asia.
Prices bounced back amid confidence OPEC will push on with promised production cuts, with data showing the group had made an early start on its pledged curbs.
“We really do need a sustained effort from some of the OPEC producers to take supply out of the market in order for prices to recover,” Jason Gammel, an analyst at Jefferies LLC, said in a Bloomberg television interview. “Now we’re starting to see that.”
West Texas Intermediate for February delivery was 41 cents higher at $46.95 a barrel as of 1:11 p.m. London time, having earlier dropped as low as $45.35 on the New York Mercantile Exchange. Total volume traded was about 29 percent above the 100-day average. The contract settled $1.13 higher at $46.54 on Wednesday.
Brent for March settlement was 78 cents higher at $55.69 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude climbed 2.1 percent to $54.91 on Wednesday. It traded at a premium of $8.44 to March WTI.
In a sign of urgency felt by producers to stall the slide in crude prices, Saudi Arabia throttled back production a month before wider supply curbs pledged by OPEC and its allies started this month. The kingdom’s cutbacks reduced OPEC’s overall output by 530,000 barrels a day in December, the group’s sharpest pullback since January 2017.
“OPEC and other producers not only have to deal with a renewed pick-up in U.S. production, but also the global outlook for growth and demand,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The market worries when data from the world’s biggest importer, China, continues to show signs of slowing.”
Apple’s forecast cut is the latest sign that a long-running trade war between the U.S. and China may be hurting the world’s two biggest economies. Along with political turmoil in Washington and higher interest rates by global central banks, the spat has weighed on crude. While the Organization of Petroleum Exporting Countries is curbing supply, investors remain wary over the effectiveness of the group’s strategy as America pumps at a record pace.
Chinese manufacturing numbers -- signaling contraction for the first time since mid-2017 -- torpedoed investor optimism on Wednesday, the first full day of trading in 2019. That’s after global stocks had their worst December rout since 2008 on concern the U.S. Federal Reserve’s tighter monetary policy will weigh on growth. Meanwhile, parts of the American government remained shut as congressional leaders failed to strike a funding deal with President Donald Trump.
Other oil-market news: Venezuela, once Latin America’s largest oil exporter, ended 2018 with a whimper as overseas sales dropped to the lowest in nearly three decades. Brent March $150 calls are the most held options contract for all of 2019 on the global crude benchmark, analysts from Societe Generale SA wrote in a report. Kazakhstan’s energy ministry has approved a tariff of $15 a ton to transport 10 million tons of Russian oil a year to China from 2019 through 2023.
With assistance from Heesu Lee. To contact the reporter on this story: Grant Smith in London at firstname.lastname@example.org. To contact the editors responsible for this story: James Herron at email@example.com Brian Wingfield.
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