Oil prices rose on Friday as OPEC’s outlook for oil demand next year fueled hopes that the producer group and its associates will keep a lid on supply when they meet to discuss policy on output next month, Trend with reference to Reuters reports.
Optimism that the United States and China could soon sign an agreement to end their trade war also seeped into the market after White House economic adviser Larry Kudlow said a deal was “getting close”, citing what he called very constructive discussions with Beijing.
Brent crude futures were up 28 cents, or 0.5%, at $62.56 a barrel by 0441 GMT, having dropped 9 cents on Thursday.
West Texas Intermediate crude was up 28 cents, or 0.5%, at $57.05 a barrel, after falling 0.6% in the previous session.
The rosy mood came after the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday it expected demand for its oil to fall in 2020.
Many analysts said that supports the view among markets that there’s a clear case for the group and other producers like Russia - collectively known as ‘OPEC+’ - to maintain limits on production that were introduced to cope with a supply glut.
But such a move may backfire, according to Jonathan Barratt, chief investment officer at Probis Group.
“There’s no reason to extend the cuts, we all know the economies are softening,” he said. “If you push prices higher it is going to hurt everyone and even if it doesn’t, it’s only going to play into the U.S. producers’ hands.”
OPEC+ on Jan. 1 cut output by 1.2 million barrels per day (bpd), and in July, the alliance renewed the pact until March 2020.
OPEC said demand for its crude would average 29.58 million barrels per day next year, 1.12 million bpd less than in 2019. That points to a 2020 surplus of about 70,000 bpd, which is less than indicated in previous reports.
The producer group will meet in Vienna next month.
In the U.S., production keeps rising although there was a bigger-than-expected increase in U.S. stockpiles and rising production last week, something that would often lead investors to sell.
Crude production rose by 200,000 bpd to a weekly record of 12.8 million bpd, the EIA said in its weekly report.
U.S. crude inventories grew last week by 2.2 million barrels, the Energy Information Administration said, exceeding the 1.649 million-barrel rise forecast by analysts in a Reuters poll.