WEEKLY ENERGY RECAP: Oil rises on US growth and easing of trade tensions with China

The crude oil market is heading toward 2020 on the front foot as trade talks continue on a positive trajectory. (AFP/File)
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Updated 21 December 2019

WEEKLY ENERGY RECAP: Oil rises on US growth and easing of trade tensions with China

  • Investors are buying into the OPEC+ output strategy

Oil continued its upward momentum for the third consecutive week and rose to its highest level in six months. Brent crude advanced to $66.14 per barrel and WTI reached $60.44 per barrel.

According to Baker Hughes data, the US oil rig count saw an increase of 18 rigs, the first double-digit growth since the beginning of April. However the current oil and gas rig tally of 813 is still 267 down from this time last year.

The crude oil market is heading toward 2020 on the front foot as trade talks continue on a positive trajectory and with manufacturing data pointing to steady US economic growth.

The upbeat mood encouraged money managers to increase their net long positions in Brent crude oil futures and options by 24,517 contracts to 398,360 in the week ending Dec. 17. Net long contracts in WTI crude oil futures and options also rose by 43,793 contracts to 272,218 over the same period.

The International Energy Agency (IEA) reported the latest OECD commercial stocks drew 32.5 million barrels to 2.9 million barrels below the five-year average and covered 60.6 days, one day below the average. This means that OECD commercial inventories have been falling fast in recent months by almost 100 million barrels.

The strong market fundamentals and positive sentiment have helped the oil price move up steadily since September with less volatility than previous months. This shows that investors are buying into the OPEC+ output strategy even if the rise in oil prices has been more about positive develop- ments in the wider market,

As US-China trade tensions ease, the global economic outlook is expected to improve, underpinning energy demand. Even as the trade war rumbled on in 2019, the growth in China crude oil imports was undiminished, hotting a re- cord 11.18 million bpd in November and surpassing the US record mark of 10.77 million bpd set in 2005.


IMF cuts global growth forecast and flags Middle East security worries

Updated 32 min 23 sec ago

IMF cuts global growth forecast and flags Middle East security worries

  • International economy is receiving significant boost — 0.5 percentage point of growth last year and this year
  • But IMF warns global economy continues to face array of risks

LONDON: The International Monetary Fund (IMF) lowered its global growth predictions for 2020 despite a slightly improving world economy and warned that geopolitical tensions in the Middle East could impact global oil supplies.

It expects world economic growth to accelerate be 2.9 percent last year, rising to 3.3 percent in 2020 and 3.4 percent in 2021.

The IMF released the figures ahead at the World Economic Forum in Davos, Switzerland.

“Rising geopolitical tensions, notably between the United States and Iran, could disrupt global oil supply, hurt sentiment and weaken already tentative business investment,” the IMF said.

The Middle East and Central Asia is expected to record 2.8 percent growth in 2020, slightly lower than the IMF's October outlook and reflecting a downward revision to Saudi Arabia’s oil output following last month’s decision by the OPEC+ group to extend supply cuts.

It expects the region to pick up speed in 2021 with growth of 3.2 percent.

IMF chief economist Gita Gopinath said: “We’ve seen clearly a rise in geopolitical tensions in the Middle East. We still have to see how far this goes. If you look at oil prices the reaction has been fairly muted at this point. We’ve seen some increase of about 3 to 4 dollars in the price of oil but nothing very large.”

Regional tensions have escalated sharply after the killing of a top Iranian commander in Baghdad, triggering Iranian retaliatory attacks.

“Prospects for several economies remain subdued owing to rising geopolitical tensions (Iran), social unrest (including in Iraq and Lebanon), and civil strife (Libya, Syria, Yemen),” the IMF said.

Although overall risks to the global economy have reduced over the year, the IMF warned that outcomes “depend to an important extent on avoiding further escalation” between Washington and Beijing.

It also flagged the possibility of new trade tensions emerging between the US and the EU.

“The reality is that global growth remains sluggish,” said IMF Managing Director Kristalina Georgieva. “We are all adjusting to live with the new normal of uncertainty.”