Oil prices gain, but set for first yearly drop since 2015

Oil prices have been tracking equity markets during volatile trading for both asset classes last week. (Reuters)
Updated 31 December 2018
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Oil prices gain, but set for first yearly drop since 2015

  • Hints of progress on a possible US-China trade deal helped bolster sentiment
  • US shale production levels would be one of the primary drivers of crude markets going forward

SINGAPORE: Oil prices climbed on the last trading day of the year on Monday, mirroring gains in stock markets, but were on track for the first yearly decline in three years amid lingering concerns of a persistent supply glut.
Hints of progress on a possible US-China trade deal helped bolster sentiment, which has been battered by concerns over a weaker global economic outlook.
Brent crude futures — the international benchmark for oil prices — rose 56 cents, or 1.1 percent, to $53.77 a barrel by 0420 GMT. Brent declined nearly 20 percent in 2018 following two years of growth.
US West Texas Intermediate (WTI) crude futures were at $45.77 a barrel, up 44 cents, or 1 percent, from their last close. WTI is down about 24 percent this year.
Crude prices have been closely tracking equity markets during volatile trading for both asset classes last week.
“Investors are looking for bargains in an illiquid market (today) ... If Trump gets over trade issues with China expect economic demand to surge,” said Jonathan Barratt, chief investment officer at Probis Securities in Sydney.
US President Donald Trump said he had a “very good call” with Chinese President Xi Jinping and that a possible trade deal between the United States and China was progressing well.
“China is still the best bet for global economic growth. Anything that severely pinches China will inevitably hurt global growth and, as a consequence, oil consumption,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
The current downward pressure on oil prices should likely taper off from January, when OPEC-led supply cuts commence, analysts said.
Earlier this month, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed to curb output by 1.2 million barrels per day starting in January to clear a supply overhang and prop up prices.
The group of producers “may hold out on supplies longer than reasonable in order to see if they can effect a rally similar to September-October this year,” Vijayakar said.
Brent hit a four-year high of $86.29 a barrel on Oct. 3 and has fallen about 38 percent since then.
While a gentle recovery is expected for prices in the first quarter 2019, the market might still remain under pressure from swelling production in the United States, which has emerged as the world’s biggest crude producer this year.
US shale production levels would be one of the primary drivers of crude markets going forward, said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures.
The market direction might get dictated if US shale producers disregard bearish signals in oil prices and push for higher output next year, Jiaxuan said.
Energy companies in the United States added two oil drilling rigs in the week to Dec. 28, bringing the total count to 885. That was up from 747 a year ago.


Iraq slams Exxon for evacuating staff amid Gulf tensions

Updated 19 May 2019
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Iraq slams Exxon for evacuating staff amid Gulf tensions

BAGHDAD: Iraq on Sunday slammed as “political” a decision by US energy giant ExxonMobil to evacuate staff from a southern oil field after Washington ordered personnel to quit its Baghdad embassy.
“The temporary withdrawal of employees has nothing to do with security in southern Iraqi oil fields or any threats,” Oil Minister Thamer Al-Ghadban said.
“The reasons are political and probably linked to tensions in the region,” he added in a statement released by the oil ministry.
Ghadban called the move to pull out staff from the West Qorna oil field west of the southern port city of Basra “unacceptable and unjustified.”
Exxon did not confirm the withdrawal.
“We are closely monitoring. As a matter of practice, we don’t share specifics related to operational staffing at our facilities,” a spokeswoman said.
“ExxonMobil has programs and measures in place to provide security to protect its people, operations and facilities. We are committed to ensuring the safety of our employees and contractors at all of our facilities around the world,” she added.
On Wednesday the United States ordered the evacuation of non-emergency staff from its Baghdad embassy and Irbil consulate, citing an “imminent” threat from Iranian-linked armed groups in Iraq.
It came 10 days after the Pentagon deployed an aircraft carrier task force and B-52 bombers to the Gulf to fend off an unspecified alleged plot by Tehran to attack US forces or allies.