Oil prices increased around 1.5 percent on Monday, pushed up by optimism that talks in Beijing can resolve a trade war between the United States and China, while supply cuts by major producers also supported crude.
Brent crude futures were at $57.93 per barrel, higher 87 cents, or 1.5 percent, from their last close.
US West Texas Intermediate crude oil futures were at $48.76 per barrel, higher 80 cents, or 1.7 percent.
Financial markets were riding a relief rally on Monday on expectations that face-to-face trade negotiations between delegates from Washington and Beijing, set to begin on Monday, would result to an easing in tensions between the two biggest economies in the world.
The United States and Beijing have been locking horns in a worsening trade war since early 2018, raising import tariffs on each other’s goods. The dispute has weighed on economic growth.
In the most recent sign of widespread economic slowdown that could also hit fuel demand, British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, preliminary data from the Society of Motor Manufacturers and Traders showed on Monday.
Goldman Sachs said in a note on Monday that it had downgraded its average Brent crude oil prediction in 2019 from $70 per barrel to $62.50 per barrel because of “the strongest macro headwinds since 2015.”
JP Morgan said in a note late last week that the “3 percent global growth pace we have been anticipating for the next two quarters looks increasingly challenging.”
The bank also said that “bond and commodity markets appear to be pricing in on average close to a 60 percent chance of a US recession over the coming year compared to a 40 percent chance by our economists and 27 percent chance by the consensus.”
In spite of the likelihood of an economic slowdown, crude future prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC Russia.
Goldman Sachs said that the cuts would result in a gradual increase in spot crude price in 2019 as high inventories revert to their 5-year averages.
OPEC oil supply slipped in December by 460,000 barrels per day to 32.68 million barrels per day, according to a survey last week, led by cuts from top exporter Saudi Arabia.
The cuts are aimed at reining in swelling supply, especially in the United States.
Due to record US crude oil production of 11.7 million barrels per day, American fuel stockpiles are rising, according to weekly data by the Energy Information Administration (EIA) released on Friday.
Crude oil inventories increased by 7,000 barrels in the week ended on December 28, to 441.42 million barrels, more than 5 million barrels higher than their 5-year average.
Distillate and gasoline stocks, on the other hand, increased by a whopping 9.5 million and 6.9 million barrels, to 119.9 million and 240 million barrels respectively, according to EIA data.