Oil prices rose by more than 1.5 per cent on Monday on hopes that talks in Beijing can resolve a trade war between the United States and China, while supply cuts by major producers also supported crude.
Brent crude futures LCOc1 were at $58.04 per barrel at 0751 GMT, up 98 cents, or 1.7 per cent, from their last close.
US West Texas Intermediate crude oil futures CLc1 were at $48.85 per barrel, up 89 cents, or 1.9 per cent.
Financial markets were riding a relief rally on Monday on expectations that face-to-face trade negotiations between delegates from Washington and Beijing, starting on Monday, would lead to an easing in tensions between the two biggest economies in the world.
The United States and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other’s goods.
The dispute has weighed on economic growth.
Goldman Sachs said in a note on Monday that it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to “the strongest macro headwinds since 2015”.
French bank Societe Generale also lowered its oil price forecasts, cutting its 2019 average price expectation for Brent by $9 to $64 a barrel and reducing its WTI forecast to $57 a barrel, also a reduction of $9.
The bank said it had revised its global oil demand growth forecast to 1.27 million barrels per day, down from 1.43 million bpd previously.
In the latest signs of widespread economic slowdown that could also hit fuel demand, British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, preliminary industry data showed on Monday.
Meanwhile, German industrial orders dropped in November, official data showed on Monday, as Germany’s exporters suffer from the trade dispute between China and the United States.
US bank J.P. Morgan said in a note late last week that “bond and commodity markets appear to be pricing in on average close to a 60 per cent chance of a US recession over the coming year compared to a 40 per cent chance by our economists and 27 per cent chance by the consensus”.
Despite the likelihood of a slowdown, crude future prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries as well as non-OPEC Russia.
Goldman said the cuts would result in a gradual increase in spot crude prices in 2019 as high inventories revert to their 5-year averages.
OPEC oil supply fell in December by 460,000 barrels per day, to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.
The cuts are aimed at reining in swelling supply, especially in the United States.
Because of record US crude oil production C-OUT-T-EIA of 11.7 million bpd, American fuel stockpiles are rising, according to weekly data by the Energy Information Administration released on Friday.
Crude oil inventories C-STK-T-EIA rose by 7,000 barrels in the week that ended on December 28, to 441.42 million barrels, more than five million barrels above their five-year average.
Distillate and gasoline stocks, however, rose by a whopping 9.5 million and 6.9 million barrels, to 119.9 million and 240 million barrels respectively, the EIA data showed.