Rally in oil to be short lived
Published on 16.01.2019 22:24

The oil price has been well supported this week as hopes grow of a trade deal between the US and China as well speculation that the world’s 2nd largest economy is not in as bad shape as some had predicted earlier

China is one of the worlds biggest purchasers of oil so any slowdown of problems with the economy tend to weigh on oil as the market places itself for a reduction in demand.

At least for now, this theory seems to be false.

"Some of the fears about the economic slowdown in 2019 seem to have ebbed away," said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.

"The market is latching on to news that suggests that the economy may be better than thought." He added.

Apart from China, the big question mark is weather potential cuts from Opec will be enough to reduce the current levels of oil from the Market and stop the price falling through $50 a barrel.

Even if the cuts do prove to be successful, some say that the record output currently underway from the US will more than offset this so any rally is likely to be short-lived.

"Any price rally is unlikely to be sustainable in the first half of the year simply because the demand for OPEC's oil is expected to be lower than the projected output from the organization," said PVM Oil Associates strategist Tamas Varga


Andrew Masters

Analyst

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