Oil prices hit new highs to make the biggest monthly gains in nearly a year as expectations emerge in the market that supplies will shrink in the markets.
Oil futures rose 1.1% on the New York Stock Exchange, to profit in the third consecutive session after trading resumed after the Christmas holidays. Prices have risen 12% this month, and have reached their highest level since mid-September. The American Petroleum Institute said that US stocks cut 7,900,000 barrels last week, while Russia cut crude production.
The drop in inventory will be the largest since August, confirmed by government data on Friday. Expectations for nine analysts in a Bloomberg survey showed a drop of 1,500,000 barrels. According to Interfax news agency, quoting Energy Minister Alexander Novak, Russia cut production by 240,000 barrels per day in the first 24 days of December.
Oil has risen by 36% so far this year, and prices have been recently supported by the improvement in the trade war between the two largest economies in the world. Futures were also strengthened by production cuts made by the Organization of the Petroleum Exporting Countries and its allies, as well as by diminished production growth in the United States of America.
West Texas Intermediate oil futures for February delivery rose nearly 65 cents to $61.76 a barrel on the New York Mercantile Exchange before the markets closed last Wednesday for Christmas. While, the settlement of Brent crude for February rose 59 cents, bringing the price of a barrel to 67.79 barrels. Prices rose 81 cents to $67.20 a barrel on Tuesday, and are up 8.6% so far this month.
Chinese data showed today, Wednesday, that US soybean imports rose to their highest level in two years, while US President Donald Trump said that the trade agreement between the two countries is underway. He added that the two sides are working on translation and paperwork, noting that the agreement will be signed before the meeting with his Chinese counterpart Xi Jinping.
According to analysts in the oil markets, the markets show that much of the strength in oil prices was from cash flows and short coverage in the first months of last year 2019. Analysts also believe that there is a good opportunity for high oil prices during several years with production growth slows from producing countries outside OPEC in the next decade.
Finally, hedge funds have boosted the stakes in US crude oil prices to reach their highest level in more than 7 months during the week ending December 17, according to data released Friday.