Oil rises in choppy trade as OPEC supply cuts compete with demand concerns

By Stephanie Kelly

NEW YORK (Reuters) – Oil prices rose more than 1 percent on Thursday in volatile trade, buoyed by signs that Saudi Arabia is cutting crude output but under pressure from fears that slowing global economic growth could hurt demand.

Brent crude oil futures they gained $1.04 to $55.95 a barrel, a gain of 1.89%. US West Texas Intermediate (WTI) crude oil futures rose 55 cents to $47.09 a barrel, a gain of 1.18%.

CHART: Shanghai Crude Oil Futures vs Brent Crude and WTI: https://tmsnrt.rs/2AmwzBl

Prices traded in a wide range, with Brent hitting a session high of $56.30 a barrel and a low of $53.93 a barrel. WTI recorded a session high of $47.49 per barrel and a low of $45.35 per barrel.

Supporting futures were signs of supply cuts from members of the Organization of the Petroleum Exporting Countries. OPEC oil supplies fell in December by the most in nearly two years, a Reuters poll found, as top exporter Saudi Arabia early started a deal to curb supply, while Iran and Libya posted declines involuntarily.

OPEC led by Saudi Arabia, along with allied producers led by Russia, agreed last year to cut supplies starting in January after oil prices fell from above $86 on worries about rising production.

“The Saudis are still on the front lines of a significant production cut that became official this week. So far, strong adherence to adjusted quotas appears a strong likelihood,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

But oil price gains were limited by concerns about a weakened global economy.

Tech giant Apple Inc cut its sales forecast, citing a slowdown in China. (.N) The news rattled U.S. stock markets and hurt oil prices, which sometimes track Wall Street.

Weaker-than-expected US factory data also added to economic concerns.

“Oil is moving on supply and demand concerns,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “It’s really a battle between the supply situation, which appears to be tightening, and the possibility that demand will decrease.”

The outlook for U.S. oil and gas executives turned negative for the first time since the low point of the last oil crisis, according to the results of a survey released Thursday by the Federal Reserve Bank of Dallas.

Investors were worried about increased supply from top producers including the United States and Russia.

U.S. crude oil inventories fell last week, while gasoline and distillate inventories built, data from industry group the American Petroleum Institute showed on Thursday.

Crude oil inventories fell 4.5 million barrels in the week ended Dec. 28 to 443.7 million, compared with analysts’ expectations for a 3.1 million barrel decline.

Gasoline inventories rose 8 million barrels, compared with analysts’ expectations in a Reuters poll for a gain of 2 million barrels. Distillate stockpiles rose 4 million barrels, compared with expectations for a gain of 1.6 million barrels, API data showed.

Official US government data is due out on Friday.

Riyadh is expected to cut prices in February for heavier crudes sold in Asia due to weaker fuel oil margins, while cutting prices to light grades to keep Saudi oil competitive against rising US shale supplies, a Reuters poll showed on Thursday.

(Reporting by Stephanie Kelly; Additional reporting by Noah Browning in London; Editing by Susan Thomas and Lisa Shumaker)