Oil prices steadied on Thursday, under pressure from high inventories but buoyed by a drawdown in U.S. crude stockpiles and indications that the trade war between the United States and China may be easing.
Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November.
But the Organization of the Petroleum Exporting Countries and other big producers, including Russia, agreed last week to reduce supply to try to trim the surplus.
Brent crude oil was unchanged at $60.15 per barrel by 0945 GMT. U.S. light crude was steady at $51.15.
“The Brent crude oil price seems to have found a floor, remaining close to $60 a barrel,” the International Energy Agency said in its monthly Oil Market Report on Thursday.
In a sign that China wants to lower trade tensions with the United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday. Investors breathed a sigh of relief across broader stock markets.
A drop in U.S. crude stocks also boosted oil, which has been riding higher on expectations that the OPEC-led planned output cuts would re-balance the market in 2019.
U.S. crude inventories fell by 1.2 million barrels in the week to Dec. 7, compared with expectations for a decrease of 3 million barrels.
The oil market should gradually rebalance and move into a supply deficit by the second quarter of next year, the IEA said, if OPEC and the other large producers stick to their deal last week to reduce output by 1.2 million barrels per day.
The reduction is needed because oil demand growth is slowing.
OPEC said on Wednesday that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.
A combination of factors such as production cuts and output losses elsewhere are likely keep markets tight in the first half of next year, Jefferies analyst Jason Gammel said.
“But… U.S. (production) growth will almost inevitably re-accelerate in 2H19 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into oversupply,” Gammel added.
The United States, where crude production has hit a record 11.7 million bpd, is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia.
