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Oil bulls oust bears in the first week of 2019

Jan 08

Oil bulls oust bears in the first week of 2019

RIYADH: After dwindling to near 16-month lows at the end of 2018, oil prices bounced back in the first week of the year, helped by OPEC’s proactive output cuts and positive economic news from the US.
The year 2019 started with a progressive rebound in oil prices after the 2018-year end nose-dive when Brent crude ended slightly above $52 per barrel. The first week in 2019 closed with Brent crude at $57.06 per barrel and WTI at $47.96 per barrel — one of the best weekly gains in two years.
It marked a change in the bearish sentiment that produced heavy losses in December 2019 when Brent averaged $56.55, the lowest monthly average since September 2017.
OPEC output fell by 530,000 bpd to 32.6 million bpd in December, which is the sharpest pullback since January 2017.
As usual, Saudi Arabia handled most output cuts in December of 420,000 bpd to 10.65 million bpd from a record of just above 11 million bpd reached in November 2018.
The Saudi output cut was compounded by unplanned losses in Iran and in Libya.
Saudi Arabia proactive move has confounded some of the raised voices that called for depressed oil prices “lower for longer.”
These voices suggested oil prices would be weak in 2019 with sluggish demand for crude and the uncertainty over full compliance from OPEC members, including the largest producer Saudi Arabia, over the agreed 1.2 million bpd supply reduction.
On the physical market side, expectations for continued strong oil demand growth in 2019 remain in place, despite concerns about the global economic slowdown that were offset by the positive economic data from the US.
The steep downward price volatility that the oil market experienced at the end of 2018 may have attled US shale oil investors.
During the last quarter of 2018, macroeconomic headwinds raised the specter of a slowing global economy and lower oil demand growth, putting downward pressure on prices while the physical market remained strong throughout 2018.