Investing.com - Saudi Arabia seems to be gaining traction with its vow to "rebalance" the oil market as crude futures scored their biggest weekly gain in at least six months from rigorous production cuts by OPEC's most powerful member.
But Friday's settlement itself was down for oil as investors took profit on a near uninterrupted rally since the start of 2019. Some of the selling also came on concerns that the Chinese economy could see one of its slowest growth years in nearly three decades, partly marring the bullish narrative.
"Oil companies face an unwelcome reality moving into 2019," London-based research institute Energy Intelligence said in its Petroleum Intelligence Weekly note. "Structural changes have injected a state of permanent instability into oil markets, making it nearly impossible to forecast prices with reliability."
New York-traded West Texas Intermediate crude settled down $1, or 2%, at $51.59 per barrel.
London-traded Brent crude, the global oil benchmark, slid by $1.10, or 1.7%, to $60.58 by 2:44 PM ET (19:44 GMT).
For the week though, WTI was up 8% for its biggest weekly gain since June.
Brent, meanwhile, rose more than 6% on the week, its largest weekly advance since April.
Just three weeks back, oil was in a bear market, with WTI down 40% on Christmas Eve from four-year highs hit in early October. U.S. crude futures have since gained more than 20%, re-establishing a bull market, in a remarkable turnaround spurred by Saudi production cuts and initial optimism over trade talks this week in Beijing between U.S. and Chinese delegations.
Saudi Energy Minister Khalid al-Falih said on Wednesday the kingdom was pumping approximately 800,000 barrels less a day from a record high of 10.2 million barrels per day in November. The amount Riyadh would ship overseas in February would be another 100,000 bpd less than January's 7.2 million bpd, he added.
While that may be the case, analysts are also fearful that current WTI prices above $50 per barrel could incentivize U.S. shale oil drillers to ramp up production, blunting some of the impact from the Saudi cuts.
U.S. crude production surged by than 2 million barrels per day in 2018 to a record 11.7 million bpd. Reuters cited consultancy JBC Energy as saying earlier this week that it was possible that U.S. output was “significantly above 12 million bpd” this month.
The other concern is China. Three days of U.S.-Sino talks concluded this week with no concrete announcements, sapping the market of the initial euphoria that a trade deal might have been announced.
Another meeting between U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He is expected later this month, and the two countries have until March 1 to make good on a deal before a deadline comes into effect that will hypothetically bring additional tariffs on $200 billion worth of Chinese goods.
Analysts have said there are mounting signs that China’s growth in 2018 and 2019 will be the lowest since 1990. Being the world's biggest oil consumer, any untoward happening in China's economy will have major ramifications for oil demand.
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