Oil prices jump on expected US-China trade talks, supply cuts

North Sea Brent crude futures (LCOc1) rose to $58.04 per barrel at 0751 GMT, up 98 cents cents, or 1.7 per cent, from their last close. US West Texas Intermediate (WTI) crude oil futures (CLc1) were at $48.85 per barrel, up 89 cents, or 1.9 per cent.

OPEC oil supply fell in December by 460,000 barrels per day (bpd), to 32.68 million bpd according a Reuters survey last week.

But this cut has more or less been undermined by swelling US oil production, which stayed at a record 11.7 million bpd in the last week of 2018, according to weekly data by the Energy Information Administration (EIA) released on Friday.

That also makes the United States the world's biggest oil producer ahead of Russia and Saudi Arabia.

US crude oil inventories also rose by 7,000 barrels in the week ending 28 December to 441.42 million barrels.

Distillate and gasoline stocks rose by a whopping 9.5 million and 6.9 million barrels, to 119.9 million and 240 million barrels, respectively, the EIA data showed.

The United States and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other's goods. The dispute has weighed on economic growth.

Goldman Sachs on Monday downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to "the strongest macro headwinds since 2015".

French bank Societe Generale also lowered its oil price forecasts, cutting its 2019 average price expectation for Brent by $9 to $64 a barrel and reducing its WTI forecast to $57 a barrel, also a reduction of $9.

The bank said it had revised its global oil demand growth forecast to 1.27 million barrels per day (bpd), down from 1.43 million bpd previously.

In the latest signs of widespread economic slowdown that could also hit fuel demand, British new car sales in 2018 fell at their fastest rate since the global financial crisis and German industrial orders dropped in November in the wake of the trade dispute between China and the United States.

US bank JP Morgan said late last week that "bond and commodity markets appear to be pricing in on average close to a 60 per cent chance of a US recession over the coming year compared to a 40 per cent chance by our economists and 27 per cent chance by the consensus".

Despite the likelihood of a slowdown, crude future prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC Russia.

Goldman said the cuts would result in a gradual increase in spot crude prices in 2019 as high inventories revert to their 5-year averages.