Oil Market Outlook

Oil prices gained support last week from improving economic indicators, including modest manufacturing growth in China and healthy US non-farm payrolls, with 128,000 jobs created in October.

Investors also shrugged off a comment by President Donald Trump that the US hasn’t agreed to fully roll back tariffs with China, as most believe that the signing of a preliminary trade deal is imminent.

But prices continued to be pressured by weak economic forecasts. The International Monetary Fund (IMF) cut its estimate of euro-zone GDP growth this year to 1.2%, compared with 1.9% in 2018. As well, US crude inventories were much higher than expected.

West Texas Intermediate (WTI) crude rose $1.04 to close at $57.24 per barrel. Brent climbed 82 cents to $62.51, and Dubai crude averaged $61. Thaioil forecasts that WTI this week will trade between $54 and $59, and Brent between $60 and $65. Prices are expected to gain support from lower output by Opec and its allies, an easing of US inventories and developments in the US-China trade deal. Among the factors expected to influence trade:

Crude output from Opec could fall as Saudi Arabia lobbies for production cuts in the hope of increasing prices before the huge initial public offering of the state oil firm Aramco in mid-December. Iran is also hoping for further cuts to push up prices. Opec and its allies will review their current agreement on Dec 5 and 6 in Vienna.

Venezuelan crude output is expected to keep declining as tougher US sanctions squeeze exports. The country’s crude exports for October fell 3.7% from the previous month to 812,000 bpd.

US crude inventories are expected to drop, as the 590,000-bpd Keystone oil pipeline from Canada remains partly shut after a leak of about 9,000 barrels in North Dakota. Refinery demand is also rising as maintenance season ends. Crude stocks in the week to Nov 1 swelled by 7.93 million barrels, against forecasts for an increase of 1.5 million.

The US and China are moving closer to a firstphase trade agreement, with some reports suggesting a signing could take place in London in mid-December. That would be positive for the world economy and oil demand. But confusion remains about when existing tariffs will start to fall, and by how much, and whether new tariffs planned for December will be scrapped.

Economic indicators to watch include US consumer prices and retail sales, revised euro-zone thirdquarter GDP and Chinese industrial production.