Brent crude headed for its biggest weekly gain since December 2016 as Saudi Arabia’s production cuts outweighed concerns over the health of the global economy.
The global benchmark is on track for an 9.4 percent advance this week, ending three consecutive weeks of losses. Prices rallied as Saudi Arabia reduced output even before OPEC’s cuts deal went into effect this month. Yet fears over global oil demand persisted ahead of further trade negotiations between the U.S. and China, where the central bank lowered reserve requirements for lenders on Friday to support growth.
“Underpinning this wave of buying is mounting evidence that Saudi Arabia has taken an axe to its oil production,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Oil’s positive start to 2019 follows its worst quarter in four years and a 20 percent annual loss driven by panic over a growing glut of crude. While OPEC’s output plunged by the most in almost two years last month and producers have pledged to curb supplies through the first half of 2019, concerns about oversupply prevail as stockpiles at America’s main storage hub show signs of swelling.
Brent for March settlement rose as much as $1.33, or 2.4 percent, to $57.28 a barrel on the ICE Futures Europe exchange, after earlier falling as much as 1.1 percent. The benchmark crude was at $57.14 a barrel at 10:40 a.m. in London.
West Texas Intermediate for February delivery rose 95 cents, or 2 percent, to $48.04 a barrel on the New York Mercantile Exchange. Prices are up 5.9 percent this week, the most since June. The March contract traded at a discount of $8.77 to Brent.
Saudi Arabia, the world’s biggest crude exporter, trimmed production last month, bringing overall output in the Organization of Petroleum Exporting Countries down 530,000 barrels a day to 32.6 million a day, according to a Bloomberg survey of officials, analysts and ship-tracking data. That’s the sharpest pullback since January 2017 when OPEC started on its strategy to clear a glut created by surging supplies from shale producers.
Oil has risen for five days, shaking off concern over global growth that’s hammered stock markets this week. Optimism that the U.S. and China are working toward a thaw in trade tensions has helped bolster prices.
China said a U.S. delegation will visit next week for trade talks, confirming the two sides will have their first face-to-face negotiation since President Donald Trump and his counterpart Xi Jinping agreed to a 90-day truce in their trade war last month.
In the U.S., the American Petroleum Institute was said to report oil inventories at the storage hub in Cushing, Oklahoma, have risen by 483,000 barrels last week. While gasoline stockpiles jumped 8 million barrels, the nationwide crude hoard fell 4.46 million barrels, according to the API.
Weekly U.S. government data on oil inventories will be released on Friday, two days later than normal because of the New Year holiday. It would be a sixth consecutive weekly increase at Cushing, if confirmed by government data on Friday.
Other oil-market news: The majority of oil executives surveyed by the Dallas Fed are still planning to boost spending in the next year, even after a plunge in prices. Saudi Arabia raised pricing for most crude grades to Asia and for all blends to buyers in the U.S. for delivery in February as the world’s biggest exporter cuts output to clear a global oil glut.