Oil rose on Monday gaining an increase of more than eight per cent since the beginning of the year, but price levels are still way below last year’s average and lower than the budget benchmark for Nigeria which relies heavily on oil revenues for the health of its economy.
Monday’s price surge came as the market absorbs cuts in OPEC production that come into force this month and marks a reversal of a very torrid close to 2018.
Brent, the international benchmark grade, rose by around 2 per cent on Monday morning to $58.21 a barrel, continuing a string of rises since the new year, which last week saw it book its largest weekly increase since mid-2017. West Texas Intermediate crude advanced 2.8 percent to $49.31 a barrel, its sixth consecutive gain.
The rise follows a slump in December to 15-month lows amid concerns about a global economic slowdown as the US Federal Reserve chose to maintain its gradual interest rate policy, dragging down equity markets as well as crude prices.
“We’re rebounding from very weak levels and a lot of pressure at the end of last year,” said Olivier Jakob at Swiss oil consultancy Petromatrix.
“The Opec cuts start now in January so you’re going into a period where Opec will manage supplies to tighten or balance the crude market.
So, there is some repositioning from that, but you are also coming from very weak levels,” he added. Worries over the state of the global economy had been fuelled by tensions between the US and China.
But the world’s two largest economies on Monday started their first formal talks since the beginning of a three-month truce in their trade war.
The two-day meeting contributed to a rally in global stock markets and sparked hopes that oil could continue its recovery. “If we can have a little bit of support from the stock market, the target is now to see if we can move back to $50 WTI and $60 Brent,” said Mr Jakob.
By our Reporter
