Ejiofor Alike with agency reports
After early slide, crude oil prices rebounded Thursday as dollar weakness and signs of production cuts by the world’s top crude exporter, Saudi Arabia, eased concerns about excess supply in the global market.
The dollar was said to have added support as it slipped against a basket of currencies, making dollar-denominated oil cheaper for holders of other currencies.
Before yesterday’s swing in oil prices, President Donald Trump, on Wednesday took credit for driving down oil prices, saying the drop amounted to a tax cut for Americans.
“People see that gasoline (petrol) is way down and the reason it’s way down is because I called up some of the OPEC people,” Trump reportedly told reporters.
“I made calls, I said you better let that oil, that gasoline flow, and they did,” he added.
However, despite Trump’s intervention, the price of international benchmark crude, Brent crude futures rose by 94 cents at $55.85 per barrel, while the United States US West Texas Intermediate oil futures rose 65 cents to $47.19 a barrel.
The Organisation of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, alongside other producers led by Russia, agreed last year to rein in supplies starting from January after oil tumbled from above $86 on worries about surging output.
Before OPEC and other producers took a decision to lower output, Trump had made it clear that he did not want oil prices to rise.
Many analysts had thought Saudi Arabia was coming under US pressure to resist calls from other OPEC members for lower crude output.
Trump had praised Saudi Arabia for helping to lower oil prices as pressure intensified to impose tougher sanctions on the Middle East ally following the murder of Saudi journalist, Jamal Khashoggi.
In a tweet when oil price was $63, Trump had thanked Riyadh for the drop and called for prices to go even lower, likening it to “a big tax cut” that could boost the United States and global economies.
The swing in the oil price, which fell as much as two per cent in earlier trade, mirrored volatility in other markets after tech giant, Apple, cut its sales forecast, citing a slowdown in China.
This has added to concerns about a slowing global economy, which weighs on prospects for oil demand.
More broadly, oil markets have been sliding with rising production from top producers, the United States and Russia.
Supply from Iraq, the second biggest producer in OPEC, has also climbed, with December 2018 exports at 3.73 million bpd versus 3.37 million bpd in November.
Both Brent and US crude were down more than a third in the last quarter of 2018, the steepest decline since the fourth quarter of 2014.
However, for most of 2018, oil prices were on the rise, driven up by healthy demand and supply concerns, especially around the impact of renewed US sanctions against major producer Iran, which were introduced in early November.
Brent rose by almost a third between January and October 2018, to a high of $86.74 per barrel, the highest level since late 2014, the start of a deep market slump amid bulging global oversupply.
Many leading analysts and traders at the time said they expected crude to hit $100 per barrel again by the end of 2018. Instead, Brent prices have wiped out all of 2018’s gains, plunging by almost 40 per cent from the $86 year’s high, in what has been one of the steepest oil market sell-offs of the past decades.