In the first half of 2019, OPEC and other major producers will cut oil output by 1.195 million barrels per day (bpd) to 43.874 million bpd. USA benchmark West Texas Intermediate (WTI) crude oil prices were $8/b lower than Brent prices in December 2018, and EIA expects this difference to narrow to $4/b in the fourth quarter of 2019 and throughout 2020.
Anxious by a drop in oil prices and rising supplies, OPEC and allies including Russian Federation agreed in December to return to production cuts in 2019.
The West Texas Intermediate for February delivery rose 1.6 USA dollars to settle at 52.11 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery increased 1.39 dollars to close at 60.38 dollars a barrel on the London ICE Futures Exchange.
"Implementation of the output cut agreement agreed by the OPEC+ will remain supportive of oil prices", said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
The U.S. rig count last week was "the lowest level seen since May 2018", said Warren Patterson, Head of Commodities Strategy at ING.
This year, oil demand growth is expected to stay robust, but expected slowdown in emerging market and developing economies (EMDEs) could have a greater impact on oil demand than expected. Prices got another boost later, on expectations that U.S. sanctions on Iran would cut supplies to major importers including China, India and Japan.
Ashton Whiteley analysts say prices have been negatively impacted by disappointing trade data out of China which revealed a decline in imports and exports as the trade tariffs imposed by the USA during the course of past year begin to take their toll. Distillate fuel production decreased for the same period, averaging 5.4 million barrels per day. China saw its exports fall unexpectedly in December by 4.4 percent, the most in two years, with imports also falling 7.6 percent in their biggest decline since July 2016.
Soaring US Crude output, which neared a record 12 million barrels per day in early January, is fuelling some of the concern among traders and investors that growth in global supply this year will outpace demand.
America's energy industry continued to expand under President Trump heading into the New Year, with new estimates showing U.S. crude output is on track to exceed Saudi Arabia "at their peak".