Brent oil prices increase after OPEC-led deal

▶ Scale of cuts not enough to push market into deficit: analyst

Brent crude oil prices climbed on Monday after producer club OPEC and some non-affiliated suppliers last Friday agreed a supply cut of 1.2 million barrels per day (bpd) from January.

Despite this, the outlook for next year remains muted on the back of an economic slowdown.

International Brent crude oil futures were at $61.72 per barrel as of press time on Monday.

Prices surged on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia announced they would cut oil supply by 1.2 million bpd, with an 800,000 bpd reduction planned by OPECmembers and 400,000 bpd by countries not affiliated with the group.

US West Texas Intermediate (WTI) crude futures were weaker, however, dropping 11 cents from their last settlement to $52.50 per barrel, weighed by surging US output as the booming American oil industry is not taking part in the announced cuts.

Despite the cuts, that was still a price forecast reduction of $6 per barrel as Bernstein reduced its crude oil demand forecast to 1.3 million bpd for 2019.

Edward Bell, commodity analyst at Emirates NBD bank, said in a note that “the scale of the cuts... isn’t enough to push the market back into deficit” and he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels.”

Oil prices have been pulled down sharply since October.

Meanwhile, the US and China are locked in a trade spat which is threatening to slow global growth and battering investor sentiment.

Despite the expectations of a slowdown, physical demand on the ground remains healthy.

China, the world’s biggest oil importer, over the weekend reported an annualized 8.5 percent jump in November crude imports, to 10.43 million bpd, marking the first time China imported more than 10 million bpd.

Strong demand is being driven by Chinese purchases for strategic reserves, but also by new refineries, triggering excess supply of fuels, filling up storage tanks and eroding refinery profits across Asia.