Oil slips on near-record USA production, demand fears

2019 US Oil Output to Average 12MM Barrels Per Day

Oil prices were up early on Monday, steadying at a two-month high last seen in mid-November, as the plunging USA rig count last week signaled a slowdown in shale drilling amid the lower price of oil.

In addition to perceived progress in the U.S./China trade talks, it cited as two other reasons for trader optimism "a more dovish stance on interest-rate hikes from the Federal Reserve and signs that OPEC-led production cuts are starting to take a bite out of supplies".

On Tuesday, China's National Development and Reform Commission gave support to crude oil prices when they spoke about adding more fiscal stimulus.

The Organization of the Petroleum Exporting Countries said in a monthly report that its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in nearly two years.

But crude fell towards $50 at the end of 2018 due to an economic slowdown and rising US supply, prompting producer group OPEC to cut output in an effort to keep prices above $60.

Opec secretary-general Mohammed Barkindo last week said the organisation remains "acutely conscious" of the importance of a sustainable, stable oil market for the global economy.

In the United States, energy companies cut the number of rigs drilling for oil by 21 last week, the biggest decline in three years, taking the count down to 852, the lowest since May 2018, energy services firm Baker Hughes said on Friday.

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Analysts said a more robust backdrop for financial markets and the prospect of slower crude production growth were the major drivers behind the rally in oil.

Stronger spreads suggest OPEC's cuts have succeeded in shifting market expectations about the outlook for 2019.

International Brent crude oil futures were at $62.57 per barrel at 0215 GMT, down 13 cents, or 0.2 percent, from their last close. News about China's stimulus measures might ease some of the concerns.

The Organization of the Petroleum Exporting Countries (OPEC) in its monthly market report cut its forecast for the average demand for its crude in 2019 to 30.83 million bpd, down 910,000 bpd from the 2018 average.

The U.S.is on its way to producing more crude than either Russian Federation or Saudi Arabia, who until recently vied for the top spot. EIA forecasts global oil demand to grow by 1.5 million b/d in 2019 and in 2020.

Crude prices also drive the cost of fuel made at the Marsden Point refinery, and the country's seasonal imports and exports of LPG.

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