Oil prices slip but on track for biggest yearly rise since 2016
Oil fell on the last trading day of 2019 but was still on track for monthly and annual gains, supported by a thaw in the prolonged US-China trade row and Middle East unrest.
Brent crude was up 11 cents at $66.78 a barrel this afternoon, while US West Texas Intermediate (WTI) crude rose six cents at $61.74 per barrel.
The volume of trade remained low as many market participants were away for end of year holidays.
Brent has gained about 23% in 2019 and WTI has risen 34%.
Both benchmarks are set for their biggest yearly gains in three years, backed by a breakthrough in US-China trade talks and output cuts pledged by the Organization of the Petroleum Exporting Countries and its allies.
Signs of progress in the talks between the US and China and the likelihood of signing a trade deal as early as next week boosted factories’ output and Chinese manufacturing activity expanded for a second month in a row.
China’s Purchasing Managers’ Index), an index showing economic trends in the manufacturing and service sectors, was unchanged at 50.2 in December from November, but still remained above the 50-point mark that separates growth from contraction.
Tensions in the Middle East also kept traders on edge as thousands of protesters and militia fighters gathered outside the US embassy in Baghdad to condemn US air strikes against Iraqi militias.
Security guards inside the US embassy fired stun grenades at protesters and the US ambassador and other staff were evacuated due to security concerns.
The US strikes could pull Iraq further into the heart of a proxy conflict between the US and Iran.
“Considering that Iraq is the second largest OPEC producer with production around 4.6 million barrels per day, market participants may add a risk premium to oil tension if tensions last for longer,” UBS oil analyst Giovanni Staunovo said.
“That said, we need to see if the latest protests spread also in the south of the country, where most of the crude is exported,” he added.
Oil prices are likely to hover around $63 a barrel next year, a Reuters poll showed today, benefiting from deeper production cuts by OPEC and its allies, and hopes that a US-China trade deal could jumpstart economic growth.
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