Oil Market Outlook

Oil prices continued their recovery last week amid optimism about the prospect of further US-China trade talks. A decline on Friday, the first in nine days, was attributed mainly to profit-taking. Traders are also encouraged that Opec and its allies are honouring their agreement to cut production by 1.2 million barrels per day to support prices. Indications that the US Federal Reserve might pause its interest-rate increases weakened the dollar, which also helps oil. However, prices remain under pressure because of concern about a general slowdown in the world economy, while US crude inventories are not falling as much as had been hoped. West Texas Intermediate (WTI) crude rose $3.63 to close at $51.59 per barrel. Brent gained $3.42 to $60.48 and Dubai crude averaged $61. Thaioil forecasts that WTI this week will trade between $49 and $54, and Brent between $58 and $63. Prices are expected to continue rising as investors are less worried about a US-China trade war. But high US output could push up inventories at a time when refinery utilisation is falling. Among the factors expected to influence trade: Three days of talks last week in Beijing have left the market optimistic that the US and China can work out some of their differences and avert a superpower trade war. China has agreed to significantly increase its purchases of US goods in sectors including agriculture, energy, and manufacturing and services. Saudi crude exports for February are forecast to decline by 100,000 bpd from January to 7.1 million bpd. Energy Minister Khalid Al-Falih said overall Opec-led cuts of 1.2 million bpd will be sufficient to balance markets, and the group is prepared to take further action if needed. US crude production has reached a record high at 11.7 million bpd, the Energy Information Administration (EIA) reported. But refinery run rates have dropped by around 1.1 percentage points to 96.1%. And while crude inventories shrank by 1.68 million barrels last week, that was less than the 2.8 million forecast. Global economic indicators are weaker, as China considers stimulus measures to revive an economy starting to feel the impact of trade tensions. Conditions are also sluggish in Europe, where German industrial production in November fell 1.9%, the third consecutive monthly decline. The World Bank predicts global growth will slow to 2.9% this year from 3% in 2018. Economic indicators to watch include US retail sales and industrial production, Chinese exports and euro zone inflation. For more information visit www.thaioilgroup.com or download the TOP Energy application for iOS or Android mobile devices.