Oil dips as China's economy slows. but Opec-led cuts support

[SINGAPORE] Oil prices dipped on Monday as China reported its weakest annual economic growth in 28 years, although oil prices remain relatively well supported by supply cuts led by the Organization of the Petroleum Exporting Countries (Opec).

International Brent crude oil futures were at US$62.57 per barrel at 0215 GMT, down 13 cents, or 0.2 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.2 per cent, at US$53.69 a barrel.

China's economy grew by 6.6 per cent in 2018, its slowest expansion in 28 years and cooling from a revised 6.8 per cent in 2017, official data showed on Monday. China's September-December 2018 growth was at 6.4 per cent, down from 6.5 per cent in the previous quarter.

The slowing growth in China, which has generated nearly a third of global growth in the past decade, is stoking worries about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.

"The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting US mortgage applications), faster China easing (China credit growth stabilising) and a more durable US-China truce," U.S. bank JP Morgan said in a note.

Despite this, analysts said supply cuts led by Opec would likely support crude oil prices.

"Brent can remain above US$60 per barrel on Opec+ compliance, expiry of Iran waivers and slower US output growth," JP Morgan said.

It recommended investors should "stay long" crude oil.

Researchers at Bernstein Energy said the supply cuts led by OPEC "will move the market back into supply deficit" for most of 2019 and that "this should allow oil prices to rise to US$70 per barrel before year-end from current levels of US$60 per barrel."

In the United States, energy firms cut 21 oil rigs in the week to Jan 18, taking the total count down to 852, the lowest since May 2018, energy services firm Baker Hughes said in a weekly report on Friday.

It was biggest decline since February 2016, as drillers reacted to the 40 per cent plunge in US crude prices late last year.

However, US crude oil production still rose by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd.

With the rig count stalling, last year's growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the United States the world's biggest oil producer ahead of Russia and Saudi Arabia.

REUTERS