Oil prices turned sharply down on Monday, after having reached 2019 highs earlier in the day, as concerns about the global economy resurfaced and a firmer U.S. dollar reduced investors’ interest in buying the commodity priced in the U.S. currency.
Oil prices started the week higher, with both international benchmarks rising early on Monday as OPEC’s supply cuts to rebalance the market and the U.S. sanctions on Venezuela’s oil combined with a sharp drop in U.S. rigs to give a bullish push to prices.
On Friday, Baker Hughes reported a sharp drop in the number of active oil and gas rigs in the United States last week. The total number of active oil and gas drilling rigs fell by 14 rigs, according to the report, with the number of active oil rigs falling by 15 to reach 847 and the number of gas rigs increasing by 1 to reach 198.
Signs that U.S. shale drilling growth could slow down lent some support to oil prices.
The latest surveys show that OPEC’s crude oil production dropped in January by the most in two years—since the initial production cut deal began in January 2017. According to the monthly Reuters survey tracking supply to the market and based on shipping data and information provided by sources at oil companies, OPEC’s crude oil production in January was 30.98 million bpd, down by 890,000 bpd from December 2018.
However, amid mixed signals from all sides, analysts see the still insufficient progress in the U.S-China trade talks as weighing on oil prices. A firmer U.S. dollar also played its part in the U-turn in oil prices on Monday.
“Oil prices have lacked direction in today’s trading session because of mixed market cues,” Abhishek Kumar, a senior energy analyst at Interfax Energy in London, told Reuters.
By Tsvetana Paraskova for Oilprice.com
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