Investing - OPEC or the stock market? Oil traders and investors are still having trouble deciding which matters more.
U.S. West Texas Intermediate and U.K. Brent crude both rose for a second-straight day Thursday, but not before another volatile session where equities had as much as say in the direction of oil as the production cuts that OPEC was trying so hard to impress the market with.
Oil prices flipped from a near 2% drop in European trade to rally as much as 2% each in New York's midmorning session before ending off the day's highs. The positive finish was helped by a Bloomberg survey that suggested OPEC's December production had the largest month-on-month drop in almost two years. A similar Reuters survey said the cartel's November output had the biggest fall since January 2017.
But oil gain's were checked through the day by U.S. stock markets diving on news from late Wednesday that Apple (NASDAQ:AAPL) was lowering its revenue forecast blaming weakness in China.
U.S. WTI settled up 55 cents, or 1.2%, at $47.09 per barrel, after a session peak at $47.47.
Brent, the global crude benchmark, was up by 94 cents, or 1.7%, at $55.85 per barrel by 3:12 PM ET (20:12 GMT) after rallying as high as $56.30 earlier.
Oil had a volatile start to the year, falling initially on Wednesday before ending more than 2% up on a Bloomberg report suggesting citing a deliberate curtailment by Saudi Arabia of its oil shipments to the United States and China last month to complete OPEC's mission of reducing global supplies by 1.2 million barrels per day over the next six months.
But the OPEC cuts may matter less if China, and by extension the world, is on the cusp of a recession, analysts say.
Global slowdown fears were being pitted against the OPEC cuts, Phil Flynn of the Price Futures Group in Chicago observed in his Thursday note on oil, although he said the cartel "is prepared to do whatever it takes to stabilize prices, even if it means losing some market share to the shale oil producers."
Aside from the stock market and global macro risks, analysts believe that shale, the main component of U.S. oil production, will remain the dark horse of the oil market in 2019. Powered by shale's dynamically-evolving fracking technology, U.S. crude production reached a record high 11.7 million bpd in 2018 and is expected to top 12 million this year.
U.S. oilfields contain the light, sweet crude that is perfect for gasoline, not the heavier sour oil from the Middle East that American refineries need for turning out diesel and other middle distillates. But in a market focused on total production numbers, it is U.S. crude that is determining price direction.
Ryan Lance, CEO of Conocco Phillips, said in a Bloomberg opinion piece: “We expect oil markets to remain volatile, in part driven by flexible North American shale production that can ramp up and down quickly in response to changes in investment levels.”
The market will be on the lookout for the American Petroleum Institute's weekly snapshot on U.S. oil supply-demand for the week ended Dec. 28, ahead of official data on Friday from the Energy Information Administration. The EIA is expected to announce a drop of 3.1 million barrels in U.S.crude inventories last week, after the previous week's slide of less than 50,000 barrels.
Also due on Friday is the U.S. jobs report for December, where the Labor Department is expected to cite a nonfarm payrolls growth of 178,000 versus 155,000 in November,