Nigeria ships fewer oil cargoes to US

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Futures picked up where they had left off in a volatile 2018, with global benchmark Brent crude climbing 5 percent to top $56 a barrel in a mid-morning surge.

West Texas Intermediate for February delivery rose 55 cents, or 1.1 per cent, to settle at US$47.09 a barrel on the New York Mercantile Exchange.

Oil's positive start to 2019 follows its worst quarter in four years and a 20 percent annual loss driven by panic over a growing glut of crude.

Prices pared gains on Friday after data from the U.S. Energy Information Administration showed a sharp increase in product inventories as refiners ramped up utilization rates USOIRU=ECI to 97.2 percent of capacity, the highest rate on record for this time of year.

Weekly data, which is more open to revisions, was reported last week at 11.7 million bpd in late December by the EIA.

"Winter-grade gasoline supplies could be approaching burdensome levels if Gulf Coast runs remain elevated at a near full-out pace", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

In addition, "U.S. crude oil exports averaged 1.9 mbpd in 2018, about twice the amount that was exported in 2017", the statement said.

As the new year begins, the oil market looks set to be dominated by big shifts in production.

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The firmer prices came after China's Commerce Ministry said it would hold vice-ministerial level trade talks with US counterparts in Beijing on January 7-8.

AAPL, +0.29% AAPL, +0.29% Meanwhile, major crude producers, including the USA and Russian Federation, continued to ramp up output in the second half of 2018.

The two nations have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and stoking fears of a global economic slowdown. Recent poor manufacturing data from China, for example, had a negative effect on the oil price since Chinese factories are a major consumer of crude. "Saudi Arabia is clearly trying to to get the United States stockpile number down because it is by far the most visible of all global stockpiles and that is where you go first if you want the market to at least buy into the idea that you are trying to control the market". That, in turn, reduces global oil stocks.

"Not only are oil prices down almost 40 per cent since October (2018), they are in fact now below where they were when the group began their first iteration of output cuts back in January 2017, " the Japanese bank said.

Members of the Organization of the Petroleum Exporting Countries produced 32.68 million barrels of oil a day in December, down 460,000 barrels a day from a month earlier, according to a Reuters survey released Thursday .

Oil's late-cycle behaviour comes from the thinking that after a long period of subdued oil prices oil company investment spending (capex) tends to fall which eventually results in lower productivity and reduced supply, which in turn drives up prices longer-term.

While OPEC has not ruled out further action, officials hope prices will be supported by further output declines in January as producers implement the new deal.