Oil prices edged up on Friday, shaking off previous losses after China said it would hold talks with the U.S. government on Jan. 7-8 to look for solutions to the trade disputes between the world’s two biggest economies.
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International Brent crude futures were at $56.12 per barrel at 0542 GMT, up 17 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude oil futures were at $47.25 per barrel, up 16 cents, or 0.3 percent.
Both crude benchmarks were down earlier in the session on concerns that the Sino-American trade war would lead to a global economic slowdown.
Traders said the firmer prices came after China’s commerce ministry said on Friday that it would hold vice ministerial level trade talks with U.S. counterparts in Beijing on Jan. 7-8, as the two sides look to end a dispute that is inflicting increasing pain on both economies and roiling global financial markets.
The two nations have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and stoking fears of a global economic slowdown.
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Data for December from the Institute for Supply Management (ISM) on Thursday showed the broadest U.S. slowdown in growth for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty started to take a toll on the world’s biggest economy.
Leading economies in Asia and Europe have already reported a fall in manufacturing activity.
“Led by a sharp fall in the U.S. ISM and China’s PMI falling below 50, the global manufacturing PMI fell to 51.5 in December (52.8 previously), a 27-month low,” Morgan Stanley said in a note following the release of the ISM data.
“The recent run of incoming data, coupled with global tightening financial conditions, has increased the downside risks to an already moderating global growth outlook,” the U.S. bank said.
OPEC CUTS
Despite the global market turmoil, traders said oil prices are expected to receive some support as supply cuts announced late last year by the Organization of the Petroleum Exporting Countries (OPEC) start to kick in.
OPEC oil supply fell by 460,000 barrels per day (bpd) between November and December, to 32.68 million bpd, a Reuters survey found on Thursday, as top exporter Saudi Arabia made an early start to a supply-limiting accord, while Iran and Libya posted involuntary declines.
OPEC, Russia and other non-members – an alliance known as OPEC+ – agreed last December to reduce supply by 1.2 million bpd in 2019 versus October 2018 levels to rein in an emerging fuel glut. The fuel surplus was in part depicted by light distillate fuel stocks at Asia’s refining hub in Singapore climbing to a record 16.1 million barrels in early January.
“If OPEC is faithful to its agreed output cut together with non-OPEC partners, it would take 3-4 months to mop up the excess inventories,” energy consultancy FGE said.
Considering the planned cuts versus ongoing increases in U.S. crude production, which hit a record 11.7 million bpd by late 2018, FGE said it expected Brent prices to range between $55-$60 per barrel in the first months of 2019.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Tom Hogue)
