Oil prices edged higher on the last trading day of the year on Monday, taking a cue from firmer stock markets, but remain on track for the first yearly decline in three years amid concerns of a supply glut.
Also, hints of progress on a possible U.S.-China trade deal helped bolster sentiment, which has been battered by concerns over a weaker global economic outlook.
Brent crude futures, the international benchmark for oil prices rose 17 cents, or 0.3 per cent to $53.38 a barrel, while the West Texas Intermediate, WTI, crude futures were at $45.52 a barrel, up 19 cents, or 0.4 per cent from their last close.
Crude prices have been closely tracking equity markets during volatile trading for both asset classes last week.
“Investors are looking for bargains in an illiquid market (today), If Trump gets over trade issues with China expect economic demand to surge,” said Jonathan Barratt, chief investment officer at Probis Securities in Sydney.
“Also, drivers on Iran with waivers ending in May are still not been put to bed. Hence, it could get ugly at any time and I expect this is a diversion for Trump when needed,” Barratt added.
U.S. President Donald Trump said he had a “long and very good call” with Chinese President Xi Jinping and that a possible trade deal between the United States and China was progressing well.
Meanwhile, imports of Iranian crude oil by major buyers in Asia hit their lowest in more than five years in November as U.S. sanctions on Iran’s oil exports took effect last month.
Asia’s imports from Iran are set to rise again in December after the U.S. granted temporary waivers to some countries, but is not known how much Iran will be able to export once the waivers expire around the start of May.
“Investors will require substantive indications from global economic fundamentals and oil inventories to move in positively on oil prices in 2018,” said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures.
“We postulate for a gentle recovery for oil prices into the first quarter of 2019 though marked volatility can snap oil prices south in lieu of market uncertainties and key events such as Brexit, U.S.-China trade truce deal, U.S. monetary policy, U.S.-Iran sanctions.”
The current downward pressure on oil prices should likely taper off from January, when OPEC-led supply cuts commence, analysts said.
Earlier this month, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed to curb output by 1.2 million bpd starting in January in a bid to clear a supply overhang and prop up prices.