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Oil prices fall amid economic woes but set for weekly gain

Oil prices fall amid economic woes but set for weekly gain

Reuters
NEW YORK
Oil prices fell more than 1 percent on Friday amid worries about a global economic slowdown, but futures were set to end the week higher, keeping some gains from a week-long rally spurred by US-China trade hopes.
Brent crude futures LCOc1 fell $1.05, or 1.7 percent, to $60.63 a barrel, by 11:30 a.m. EST (1630 GMT). US West Texas Intermediate (WTI) crude futures CLc1 also lost 1.7 percent, or 88 cents, trading at $51.71 a barrel.
Both benchmarks were set for their second week of gains, rising nearly 8 percent and 6 percent respectively.
Markets were supported earlier this week by hopes that an all-out trade war between Washington and Beijing might be averted. Three days of talks concluded on Wednesday with no concrete announcements, but higher-level discussions may convene later this month.
“Some of the strength that we’ve gotten from that seems to be coming out of the market,” Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
“Right now I think the market is in a holding pattern above our recent lows and it’s looking for its next driver,” McGillian said.
Investors remained concerned about a slew of recent economic data that has raised worries about a global economic slowdown.
China plans to set a lower economic growth target of 6-6.5 percent in 2019 compared with last year’s target of “around” 6.5 percent, policy sources told Reuters, as Beijing gears up to cope with higher US tariffs and weakening domestic demand.
“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” said Hue Frame, portfolio manager at Frame Funds in Sydney.
Overall, the recent advance for the energy complex has been powered by optimism over US-China trade talks, as well as a December output drop from major producers and a decline in last week’s US crude inventories. Oil production from the Organization of the Petroleum Exporting Countries fell by 630,000 barrels a day to a six-month low of 32.43 million barrels in December, according to an S&P Global Platts survey released earlier this week.
“A major bull-run is still far from formulating” in the oil market, and “prices are still close to 30 percent lower than the recent highs in October, to put the current levels in perspective,” said Balint Balazs, global commodity analyst at Schneider Electric. “For the near-term, however, the OPEC+ cuts, the continuous drop in Iranian exports, and a weaker dollar could help support crude prices.”
On the supply side, oil markets have received support from supply cuts led by the Organization of the Petroleum Exporting Countries. The deal is aimed at reining in a glut that emerged in the second half of 2018.
Lower oil exports from Iran since November, when US resumed sanctions against the OPEC producer, have also supported crude.
Iran will see its crude exports severely curtailed for a third month in January, according to tanker data and industry sources.
Playing a key part in the emerging glut was the United States, where crude oil production has soared to a record 11.7 million barrels per day.
Consultancy JBC Energy this week said it was likely that US crude production was “significantly above 12 million bpd” by this month.
US energy firms, however, last week cut oil rigs for the first time in three weeks as producers started to reduce their 2019 drilling plans with the collapse in crude prices at the end of last year.

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