Investing - OPEC or the stock market? Oil traders and investors are still having trouble deciding which matters more.
U.S. West Texas Intermediate and U.K. Brent both flipped from a near-2% drop in Thursday's earlier trading to rally as much as 2% each before the start of the New York session after a Bloomberg survey reported that OPEC's December production had the largest month-on-month drop in almost two years. A similar Reuters survey later said the cartel's November output had the biggest fall since January 2017.
Despite that, oil bulls' cheer was short-lived as the gains in crude were virtually wiped out by U.S. stock markets diving on news from late Wednesday that Apple (NASDAQ:AAPL) was lowering its revenue forecast, a development being read as an extension of the U.S.-Sino trade tensions weighing on the company.
U.S. WTI was up just 1 cent at $46.55 per barrel by 11:32 a.m. ET (16:32 GMT).
Brent, the global crude benchmark, rose by 29 cents, or 0.5%, to $55.20 per barrel after rallying as high as $56.30 earlier.
Oil had a volatile start to the year, falling initially on Wednesday before ending more than 2% up on a Bloomberg report suggesting citing a deliberate curtailment by Saudi Arabia of its oil shipments to the United States and China last month to complete OPEC's mission of reducing global supplies by 1.2 million barrels per day over the next six months.
But the OPEC cuts may matter less if China, and by extension the world, is on the cusp of a recession, analysts say.
Global slowdown fears were being pitted against the OPEC cuts, Phil Flynn of the Price Futures Group in Chicago observed in his Thursday note on oil, although he said the cartel "is prepared to do whatever it takes to stabilize prices, even if it means losing some market share to the shale oil producers."
Aside from the stock market and global macro risks, analysts believe that shale, the main component of U.S. oil production, will remain the dark horse of the oil market in 2019. Powered by shale's dynamically-evolving fracking technology, U.S. crude production reached a record high 11.7 million bpd in 2018 and is expected to top 12 million this year.
U.S. oilfields contain the light, sweet crude that is perfect for gasoline, not the heavier sour oil from the Middle East that American refineries need for turning out diesel and other middle distillates. But in a market focused on total production numbers, it is U.S. crude that is determining price direction.
Ryan Lance, CEO of Conocco Phillips, said in a Bloomberg opinion piece: “We expect oil markets to remain volatile, in part driven by flexible North American shale production that can ramp up and down quickly in response to changes in investment levels.”