Oil prices rise, but set for first annual decline since 2015

Brent crude futures- the international benchmark for oil prices- rose 17 cents or 0.3 percent to $53.38 a barrel

In earlier trade, WTI was up over $1 at $46.53 a barrel. Five American manufacturing indexes all dropped in December, the first such across-the-board decline in two years.

"That's raising concerns about demand growth", said Phil Flynn, an oil markets analyst at Price Futures Group in Chicago. Prices for global oil benchmark, London-traded Brent crude futures were trading in the mid-$80's range in early October, while US oil benchmark, NYMEX-traded West Texas Intermediate (WTI) crude futures were hovering in the mid $70's-range, a comfortable price point for USA shale oil producers, and around $25per barrel above the average oil production break-even point for shale producers.

"We expect USA (companies) will increase shale oil production continuously over the next year", said Adrià Morron Salmeron, economist at CaixaBank Research. The price on Thursday was about $53.50 while the average so far in 2018 has been about $72.

Analysts have a somewhat bearish outlook for crude oil in 2019.

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The current downward pressure on oil prices should likely taper off from January, analysts said, as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies including Russian Federation start curbing production by 1.2 million barrels per day (bpd). A survey of 32 economists and analysts forecast an average Brent price of $69.13 a barrel next year, compared with $71.76 in 2018. It's trading at a premium of US$7.61 to March WTI.

This dynamic has proven true over the past two-and-a-half months as market pundits have watched (often in amazement) how global oil prices reached multi-year highs in October, only to quickly plunge by 40 percent to date. That was the highest level since late 2014, the start of a deep market slump amid bulging global oversupply. Renewed U.S. sanctions against major producer Iran, as well as healthy economic conditions and concerns about crude supplies, had elevated crude until October.

However, though the analysts surveyed by Bloomberg give credence to ongoing trade tensions between the USA and China, it appears that unless a new trade deal is reached by the self-imposed March 2 deadline between the two sides, global oil demand will indeed recede amid more sluggish global economic growth, led by a slow down in Chinese manufacturing and exports.

"OPEC and non-OPEC producers found themselves competing with additional supplies from the US that overwhelmed the market", said Andy Lipow, president of Lipow Oil Associates in Houston. "That said, it is nonetheless a hard tool to use correctly in a world where forecasters tend to routinely underestimate US production by several hundred thousand barrels per day", JBC Energy consultancy said in a daily note. -China trade tensions, angst of U.S. Federal Reserve policy, and wars in Syria, Yemen and elsewhere, which make it increasingly hard to forecast the direction for future oil prices. The rig count is used as an indicator for future output. But North American producers will likely begin to reduce spending on drilling in 2019 as prices fall below break-even levels for new wells in the Permian Basin and the Eagle Ford shale field in Texas, analysts said. "More companies are reducing capital expenditures, and production probably isn't going to go as high as forecast".

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