Oil prices rose over 3 per cent on Monday, but gains were capped by concerns about the slowing global economy and rising crude supplies.  BP photo.

Oil prices up over 3 per cent

After dropping to their lowest since October 2018 late last week, oil prices rose almost 3 per cent on Monday.  Gains were capped, however, by uncertainty over slowing global economic growth and rising crude production.

By 2:53 p.m., EST, benchmark Brent crude was up $1.56 to $60.60/barrel while US West Texas Intermediate climbed $1.25 to $51.67/barrel.  On Friday, Brent dropped to $58.41/barrel and US WTI hit $50.15/barrel.

“Prices slumped heavily last week,” Commerzbank commodities analyst Carsten Fritsch told Reuters. “It is therefore not surprising to see a counter move.”

Also on Cyber Monday, US stock markets broadly rallied which supported oil prices.  As well, oil prices were underpinned by a report from market intelligence firm Genscape which showed crude stockpiles at the Cushing, Oklahoma delivery point for WTI only rose by 126 barrels from Tuesday to Friday.

However, record output from Saudi Arabia undermined the rebound on Monday.  An industry source told Reuters that Saudi Arabia’s output for November hit a record high of 11.1 to 11.3 million barrels per day (b/d).

The higher US dollar also undercut demand along with higher borrowing costs and concerns over the ongoing trade war between the United States and China.  Investors are shifting out of assets closely aligned with the global economy, which include equities or oil.

According to Reuters, in November, hedge funds pulled over $12 billion from the oil market, despite expectations of a cut in production of 1.4 million b/d by OPEC and its allies in the new year.

Goldman Sachs is hopeful that the G20 meeting this week in Buenos Aires, Argentina, this week will be the catalyst for a rebound in commodities prices.  The investment firm also hopes the summit will prompt a that in US-China trade tensions as well as offer more clarity on the possible OPEC supply cut.

Goldman says it believes OPEC and its allies will come to an agreement to curb production, which would boost oil prices.

“While we didn’t think that Brent prices were justified at $86 per barrel, neither do we believe that they are at $59 with our 2019 Brent forecast at $70,” Goldman said.

On Monday, Ecuador announced it would support a decision by OPEC to curb oil output when the cartel meets in Vienna next week.

“We will support it because it will have a positive impact,” said Ecuador’s Energy Minister Carlos Perez. “The moment we get crude inventories under control, that will have an effect on the price of crude.”