OPEC led prices cut along with the release of Chinese refinerery processing data in 2018, led to the peaking of crude oil.
On Monday, oil prices recorded the highest peak following the release of data that showed China’s
refinery processing touched a record high in 2018 despite a slowdown in its economy.
China is the world’s second-largest consumer of oil.
According to analysts, prices are further being supported by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC).
As of 0404 GMT, international Brent crude oil futures LCOc1 were at $62.94 per barrel, up by 0.4% or 24 cents, from their last closing prices. The development assumes significance since this is the first time in 2019 that Brent crude rose above the $63 level.
Mirroring the gains was also U.S. West Texas Intermediate (WTI) crude futures Clc1; it was up by 0.5% or by 25 cents to $54.05 a barrel. Again, this was the first time in 2019, that WTI rose above the threshold of $54 a barrel.
Although the slowdown in the Chinese economy was as per expectations, the slowdown was not as sharp as some analysts had expected.
“The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting U.S. mortgage applications), faster China easing (China credit growth stabilizing) and a more durable U.S.-China truce,” said analysts from J.P. Morgan said in a note.
However, despite this, OPEC led cuts are likely to support crude oil prices, said analysts.
“Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower U.S. output growth,” said J.P. Morgan and advised investors to “stay long” in the oil market, referring to buying futures in the expectation that prices will rise.
According to researchers from Bernstein Energy, the supply cuts led by OPEC “will move the market back into supply deficit” for most of 2019 and that should cause prices to rise to $70 a barrel before the end of the year.
In a weekly report on Friday, energy services firm Baker Hughes stated, U.S. energy firms have cut the number of rigs drilling for oil by 21 in the week to January 18, thus bring the total count down to 852 – the lowest since May 2018.
This was the biggest decline since February 2016, as drillers reacted to the 40% drop in U.S. crude prices in late 2018.
Despite the drop in rig count, U.S. crude oil production C-OUT-T-EIA rose by more than 2 million bpd in 2018, to a record 11.9 million bpd.
However, last year’s growth rate is unlikely to repeat itself this year, feel analysts; they expect annual production to average well over 12 million bpd thus making the United States the world’s biggest oil producer, ahead of Russia and Saudi Arabia.