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Jan. 3 (UPI) -- Oil prices rose early Thursday after a day of high volatility with concern about an economic slowdown in the world's biggest oil importer China playing against reports that OPEC is seeing some output cuts. West Texas Intermediate crude future prices rose 0.5 percent to $46.78 per barrel as of 8:15 a.m. EST, with Brent gaining 1.2 percent to $55.54 as of the same time.
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A seven percent jump in crude oil during the trading session on Wednesday, influenced by the release of a production survey showing declines in oil exports by OPEC, "proved short lived," Ole Hansen, head of commodity strategy at Saxo Bank, told UPI.
While concern about crude oil oversupplies has driven the market for several weeks, there are other factors increasingly coming into play including a potential economic slowdown that could reduce crude oil demand.
"The previous sell-off occurred during a time of rising demand. On that basis, producers found it relatively easy to trim output and change the direction of oil," Hansen said. In November 2016, OPEC agreed on an oil cut that effectively boosted crude oil prices, which had been declining since 2014.
"This time it is different with OPEC and other producers not only having to deal with a renewed pickup in United States production. They also have to worry about the global outlook for growth and demand, something over which they have no control, and especially the fact that China, the world's biggest oil importer, continues to show signs of economic slowdown," Hansen said.
Oil traders are watching stocks like Apple, which can be a good indicator for the Chinese economy given its large exposure to that market. The company has already confirmed it will miss its fourth quarter sales target for 2018 due to a slowing economy there.
Other indicators for China include the Australian currency, which has often reflected well the Asian economy. The Australian currency this morning hit its lowest level against the U.S. dollar in a decade.
Reductions in OPEC crude exports seen so far by traders in December contributed to help oil prices strengthen, but concern about whether Russia would keep its pledge to OPEC remain. In addition, the U.S. oil production will continue to add a bearish tone, separately said independent analyst Lakshan de Silva.
"Libya which was exempted from OPEC production cuts, saw two oil trading ports (Es Sider and Brega) closed due to adverse weather conditions. This, along with OPEC cutting production by 825 million barrels per day in December, with an additional cut of 870 million barrels per day expected for January would be a boon in the short term," de Silva said.
The OPEC and Russia agreed on Dec. 7 to work towards eliminating 1.2 million barrels of crude oil per day of supply starting January 1, with OPEC accounting for 800 million barrels and non-OPEC, mainly Russia, for the rest.
"Russian crude production hit a post-Soviet high last year averaging 11.16 million barrels per day. It will be interesting to see how Russia keeps its pledge to OPEC. Generally it takes over a month for cuts to be fully enforced," he added.
In addition "U.S. shale is likely to disrupt any steep price momentum during the first quarter of 2018, as U.S. gulf refineries are looking inwards to procure light crude," de Silva said.
