Oil prices surged Friday as OPEC’s scope for oil demand next year fueled hopes that the producer organization and its associates will keep a lid on supply when they meet to discuss policy on output in December. Optimism that the U.S. and China may soon sign a contract to end their trade war additionally seeped into the market after White House economic adviser Larry Kudlow mentioned an agreement was “getting close”, citing what he called very productive discussions with Beijing.
Brent crude futures had been up 28 cents, i.e., 0.5%, at $62.56 per barrel by 0441 GMT, having fallen 9 cents Thursday.
West Texas Intermediate (WTI) crude was up 28 cents, i.e., 0.5%, at $57.05 per barrel, after dropping 0.6% in the earlier session.
The rosy mood came after the Organization of the Petroleum Exporting Nations (OPEC) said Thursday it anticipated demand for its oil to decline next year.
Many analysts said that it helps the view among markets that there’s a transparent case for the group and other producers like Russia – collectively known as ‘OPEC+’ – to maintain limits on output that had been introduced to cope with an oversupply.
However, such a move might backfire, according to Jonathan Barratt, chief investment officer at Probis Group.
OPEC+ on January 1 cut output by 1.2 million barrels per day (bpd), and in July, the alliance renewed the agreement until March 2020.
OPEC stated demand for its crude would average 29.58 million barrels per day in 2020, 1.12 million bpd less than in 2019. That points to a 2020 glut of about 70,000 bpd, which is less than shown in earlier reports.