Brent crude set for longest-ever rally on OPEC, economic outlook

London, UK - Oil rose for a tenth consecutive day in London on Friday, heading for its longest run of gains on record, as OPEC cutbacks reined in supply while reassurance from the US Federal Reserve buoyed the outlook for demand.

Oil futures returned to a bull market last week after recovering about 20 per cent from the lows reached in December, as Saudi Arabia gave assurances on Wednesday that the production cuts by OPEC and its partners starting this month will be deep enough to prevent any surplus. Nonetheless, Brent crude remains 28 per cent below the four-year high it hit in October as US shale output continues to surge and China’s economy shows signs of slowing.

“The mood brightens, and the market realises that the world economy and oil demand are not grinding to a halt,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group in Zurich. “Moreover, there is confidence that the petro-nations will cut supplies as promised to balance the market.”

Brent for March settlement rose 21 cents to $61.89 a barrel on the ICE Futures Europe Exchange at 11.48am in London on Friday. It’s on track for an 8.5 per cent increase this week after gaining 9.3 per cent, the most in two years, the previous week. Ten consecutive daily gains would mark the longest rally since the contract started trading in 1988. The global benchmark crude traded at a premium of $8.67 a barrel to West Texas Intermediate for the same month.

WTI for February delivery advanced 32 cents to $52.91 a barrel on the New York Mercantile Exchange. The US crude has also advanced for a tenth day, its longest run of daily gains since 2010, and has added ten per cent this week, the most since De- cember 2016.

Crude’s direction in the coming weeks may be determined by whether the Organization of Petroleum Exporting Countries, and allies including Russia, implement output cuts they have promised for the first six months of 2019. Also crucial will be the outcome of trade negotiations between the US and China-the world’s two biggest economies. A deal be- tween the nations could boost flagging global growth that underpins oil demand.

Khalid al Falih, Energy Minister of Saudi Arabia said on Wednesday that the cut of 1.2 million barrels a day agreed by the OPEC+ coalition will be sufficient to balance markets, and that the group is prepared for further action if it proves inadequate.

“Sentiment in the oil market has turned around this week,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen. The reversal “is on the back of a combination of OPEC+ production cuts taking effect, a stabilisation in risk sentiment in equity markets and a weaker dollar. In addition, the oil market will be monitoring trade talks, which seem to progress slowly.”

While recent progress seen in US-China talks has lifted investor sentiment, global financial markets are still struggling to decipher what exactly may have been promised in their negotiations this week.