Oil prices rise after Christmas Eve plunge

Dwayne Harmon
December 27, 2018

Meanwhile, the US administration is struggling to contain the market turmoil, which intensified in the wake of a Bloomberg News report that Donald Trump had discussed firing Powell.

OIL in London fell below $50 a barrel for the first time since July 2017 as broader financial market turmoil and worries over United States supply countered signs the Opec+ coalition may extend or deepen output cuts. Despite lingering concerns about a global economic slowdown, US WTI futures were up 0.33 percent as of 2:06 p.m. HK/SIN, to trade at $42.68 per barrel. The U.S. benchmark is down about 16 percent since the producer group announced the agreement.

Stock market volatility is also pressuring oil prices.

The producers' alliance, known as OPEC+, plans to lower output by 1.2 million barrels per day, of which OPEC's share is 800,000 bpd, next year, and some ministers have even suggested taking further action. The chance of another meeting by OPEC and its allies is "sending a signal to the market that they will do whatever it takes".

The macroeconomic picture and its impact on oil demand continue to pressure prices.

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The trade dispute between the United States and China and the prospect of a rapid rise in USA interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

"I think there is a smidgen of over-expansion to the drawback connected to worldwide market fears", said Olivier Jakob, examiner at Petromatrix. But a decision by OPEC and its allies led by Russian Federation earlier this month in Vienna to implement 1.2 million barrels per day production cuts has at least for the time being stabilized the price outlook amid expectations that the reduction would prevent a surplus from building in the early part of 2019. Bloomberg quoted a Rakuten Securities analyst as saying, "There are several bearish factors in oil markets, and the situation won't improve anytime soon".

Brent crude, the global benchmark, rose US$4, or 8 per cent, to settle at US$54.47 a barrel. The contract slumped $3.06 to $42.53 on Monday.

Crude-oil futures snapped back by some 8% on Wednesday, to break a string of three straight declines, after closing the pre-Christmas session at their lowest since July 2017.

Brent for February settlement added $1.12/bbl to $51.59/bbl on the London-based ICE Futures Europe exchange after earlier dropping to as low as $49.93.

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