Oil prices were on track for solid weekly gains on Friday after financial markets were lifted by hopes the United States and China may soon resolve their trade disputes, and as OPEC-led crude output cuts started to tighten supply.
Despite this, markets were held in check by expectations of an economic slowdown in 2019.
International Brent crude futures LCOc1 were at $61.59 per barrel at 0555 GMT, down 9 cents, or 0.15 per cent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were 4 cents below their last settlement, at $52.55 per barrel.
Brent and WTI are set for their second week of gains, rising nearly 8 per cent and 10 per cent respectively.
Markets were being supported by hopes that the trade war between Washington and Beijing may be resolved soon after officials said three-day talks this week concluded constructively and that further negotiations would likely follow this month.
Lower oil exports from Iran since last November, when U.S. sanctions against it resumed, have also supported crude.
Despite this, concerns over the health of the global economy lingered on, with signs mounting that China’s growth in 2018 and 2019 would be the lowest since 1990.
“If we experience an economic slowdown, crude will under-perform due to its correlation to growth,” said Hue Frame, portfolio manager at Frame Funds in Sydney.
Most analysts have downgraded their global economic growth forecasts below 3 per cent for 2019, with some even fearing a looming recession amid trade disputes and spiralling debt.
On the supply side, oil markets are receiving support from supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at reining in a glut that emerged in the second half of 2018.
A key reason for the emerging glut was the United States where crude oil production C-OUT-T-EIA soared by more than 2 million barrels per day (bpd) in 2018 to a record 11.7 million bpd.
Consultancy JBC Energy this week said it was likely that U.S. crude oil production was already “significantly above 12 million bpd” by January 2019.
Given the overall supply and demand balance, Swiss bank Julius Baer said it was “price neutral” in its oil forecast.
“We see the oil market as well balanced into the foreseeable future, as the petrol-nations make space for further U.S. shale production growth,” said Norbert Ruecker, head of commodity research at the bank.