Oil price posts biggest annual rise in 3 years

Forecasters do not expect oil prices to move sharply in either direction this year. Brent crude is expected to hover around US$63 a barrel, a Reuters poll showed on Tuesday, down modestly from current levels, as Opec production cuts offset weaker dem
Forecasters do not expect oil prices to move sharply in either direction this year. Brent crude is expected to hover around US$63 a barrel, a Reuters poll showed on Tuesday, down modestly from current levels, as Opec production cuts offset weaker demand. Over the past year, increased US output offset the supply reductions undertaken by Opec.PHOTO: AGENCE FRANCE-PRESSE

Breakthrough in US-China trade talks, supply cuts by major producers behind big gain

NEW YORK • Oil prices fell 1 per cent on Tuesday, the last trading day of the decade, but notched the biggest annual gain in three years, backed by a thaw in the US-China trade war and ongoing supply cuts from major oil producers.

Brent gained about 23 per cent in 2019 and West Texas Intermediate (WTI) rose 34 per cent, their biggest yearly gains in three years, supported by the recent breakthrough in US-China trade talks and output cuts pledged by the Organisation of Petroleum Exporting Countries (Opec) and its allies.

Forecasters do not expect oil prices to move sharply in either direction this year. Brent crude is expected to hover around US$63 a barrel, a Reuters poll showed on Tuesday, down modestly from current levels, as Opec production cuts offset weaker demand.

Over the past year, increased US output offset the supply reductions undertaken by Opec, led by Saudi Arabia and stemming from US sanctions on Venezuela and Iran. Lacklustre demand, including in developed economies, remains a primary concern this year.

"Oil prices, though largely expected to trade positive, will face headwinds from subdued global growth momentum and robust US shale output levels in the first quarter (of 2020)," said Mr Benjamin Lu, an analyst at Phillip Futures.

US crude production in October rose to a record of 12.66 million barrels per day (bpd) from a revised 12.48 million bpd in September, according to a monthly report by the US government.

The pace of growth is expected to slow in 2020.

Brent crude fell 67 US cents, or 1 per cent, to settle at US$66.00 a barrel. WTI crude in the United States fell 62 US cents, or 1 per cent, to settle at US$61.06 a barrel.

On Tuesday, trade volumes were low with many market participants away for year-end holidays, amplifying the market's moves.

US President Donald Trump has said the phase 1 trade deal with China would be signed on Jan 15 at the White House.

The deal has boosted factories' output and Chinese manufacturing activity expanded for a second straight month.

China's Purchasing Managers' Index (PMI), which tracks economic trends in the manufacturing and service sectors, was unchanged at 50.2 in December from November, just above the 50-point mark separating growth from contraction.

Investors were nervous about the Middle East, where thousands of protesters and militia fighters gathered outside the US embassy in Baghdad on Tuesday and yesterday to condemn American air strikes against Iraqi militias.

Security guards inside the embassy fired stun grenades at protesters. The US ambassador and staff were evacuated.

"Considering that Iraq is the second-largest Opec producer with production around 4.6 million barrels per day, market participants may add a risk premium to oil if tensions last for longer," UBS oil analyst Giovanni Staunovo said.

"That said, we need to see if the latest protests spread also in the south of the country, where most of the crude is exported."

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 02, 2020, with the headline 'Oil price posts biggest annual rise in 3 years'. Print Edition | Subscribe