Oil prices steady as China-US trade tensions ease

Brent crude rises to $61 on Libyan supply cut, US inventories

Oil prices rose on Thursday, buoyed by a drawdown in US crude inventories and signs that China is taking more concrete steps to put a trade war truce with Washington into action. US crude gained 99 cents to $52.64.

Oil ministers said the cuts would be from October production levels except for Kuwait and that Iran, Venezuela and Libya - at risk of output declines due to USA sanctions, economic collapse and unrest, respectively - were not required to reduce supply.

In its latest Short-Term Energy Outlook released on Tuesday, EIA estimated that USA crude oil production averaged 11.5 million barrels per day in November, up 150,000 barrels per day from October levels because of platforms resuming normal operations after hurricane-related outages in October. USA light crude was 79 cents higher, or 1.5 percent, at US$51.94 a barrel.

The Organization of the Petroleum Exporting Countries agreed last week with Russia, Oman and other producers to cut oil output by 1.2 million bpd from January to stem a build-up in unused inventories of fuel.

He added, "The market's working hard to put a bottom in there in the low $50s.we see capacity for the market to probably move up $10 through the first half of next year and provide a bit of value back into some of those energy equities as well".

Opec, which pumps more than a third of the world's crude, is grappling with an oil glut because of record United States production, tepid global demand as major economies slow down and the U.S. granting of waivers to countries importing oil from sanctions-hit Iran. Brent oil prices have failed to rally even after the agreement was announced.

USA crude inventories fell by 1.2 million barrels in the week to December 7, compared with expectations for a decrease of 3 million barrels. Brent is trading around $60 as of December 12.

Time will tell how effective the new production agreement will be in re-balancing the oil market. Prices are hovering at $60 a barrel, a 30 per cent drop from the $86 a barrel reached in early October.

On Wednesday, the API reported a massive build of -10.180M million barrels inventories, compared with analysts' expectations for -525K barrels draw. That was the first weekly decline since October, analysts at the Sevens Report wrote in a newsletter Thursday, but they noted that given a change in the way the EIA reports production, in increments of 100,000 as opposed to exact estimates, "the decline could have been a rounding error".

A third OPEC watcher, who also saw the deal as vague, cited the potential for unplanned output losses such as at Libya's Sharara oilfield to give tailwind to pledges of lower supply.

Oil prices regularly overshoot the level needed to balance demand and supply.

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