Oil bounces back to bull market fueled by OPEC cuts, trade talks

Oil rises one per cent on US, China trade talk optimism

Oil rises one per cent on US, China trade talk optimism

Saudi Arabian Energy Minister Khalid Al-Falih said on Wednesday that the cut of 1.2 million barrels a day agreed by the OPEC+ coalition will be sufficient to balance markets, and that the group is prepared for further action if it proves inadequate. "But the trade negotiations between the USA and China still add some uncertainty to global financial and oil markets, possibly leading to corrections in prices in the shorter term".

Crude is recovering from a slump of nearly 40 percent in the final three months of 2018.

The surge in US crude production runs counter to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut supply aimed at reining an emerging glut. As producers say they won't let oil stockpiles exceed normal levels, fears of a slowdown in demand is abating as trade tensions ease between the world's top-two economies.

"There is further upside to come in prices, as we see more evidence coming through that members of OPEC+ are complying with their new production cut", said Warren Patterson, senior commodities strategist at ING Bank NV. "Coupled with OPEC+'s output curb efforts, prices are likely headed for the $55 mark".

International Brent crude futures were down 0.9 percent, or 57 cents, at $60.87 per barrel.

There's hope. and then there is reality which saw a whopping 10.6 million barrel surge in distillates and over 8 million barrels of gasoline added this week, numbers which were generally ignored by the market, which instead has been focusing on the recent plunge in the dollar, the result of a far more dovish Fed, which has helped support oil prices as the dollar decline made commodities priced in the US currency more affordable. Prices surged 5.2 percent on Wednesday, capping a 17 percent climb in eight sessions to undo more than half of 2018's full-year loss. It's also jumped more than 20 percent since December 24.

WTI crude closed above $52 a barrel, staging a powerful, 23% recovery after hitting an 18-month low on Christmas Eve.

The main source of new supply is the United States, where crude oil production remained at a record 11.7 million barrels per day (bpd) in the week ending January 4, the Energy Information Administration (EIA) said on Wednesday. Distillate stocks swelled by 10.6 million barrels, to 140.04 million barrels.

Vandana Hari of consultancy Vanda Insights in Singapore said in a note that oil prices dropped "as optimism fueled by the U.S". Negotiations were "extensive, in-depth and detailed", and laid the foundation for the resolution of issues of mutual concern, China's Ministry of Commerce said in a statement Thursday.

Also on Wednesday, minutes of the Fed's December meeting showed policy makers were attentive to recent financial-market volatility and risks to the outlook.

The growing optimism allowed traders to overlook a report of a steep inventory jump for USA gasoline and diesel.

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