Investing.com - With OPEC surveys and weekly U.S. data and rig counts out of the way, it's back to the daily grind for oil and how the trade talks between the U.S. and China are progressing.
New York-traded West Texas Intermediate crude and London's Brent oil surged in early trading Monday to 2019 highs before settling down after White House economic adviser Kevin Hassett told CNBC there was still "a lot of work to do” on negotiations wth Beijing, dampening optimism of an imminent deal. With China being the world's largest oil importer, much of crude's prospects hinges on its economic wellbeing.
Also weighing on oil was data showing an unexpected fall in new orders for U.S.-made goods in November, with sharp declines in demand for machinery and electrical equipment.
WTI hit a 2019 high of $55.75, its best intraday price since Nov. 21, before settling down 70 cents, or 1.3%, at $54.56 per barrel, giving back about half of Friday's gains.
Brent, the global oil benchmark, rose to a Dec. 7 high of $63.63 a barrel before trading down 3 cents at $62.72 by 3:29 PM ET (20:29 GMT).
Crude's rally last week was helped by a Bloomberg survey showing Saudi monthly crude exports at their lowest in two years, surprisingly large U.S. payrolls growth for January and the Federal Reserve's decision to leave raise interest rates unchanged, while assuring it will be patient with future tightening.
Oil was also supported last week by the Trump administration's sanctions against Venezuelan oil and the latest reading on the U.S. rig count published by industry firm Baker Hughes, which showed oil rigs dropping by 14 units to a nine-month low of 847.
Some analysts remain positive about the market though, citing WTI's rebound from Christmas Eve lows beneath $43 a barrel.
"We have not changed our directional crude oil price view, expecting a price improvement in the first half of the year as the Saudi supply cuts start to have a greater visible impact. The sanctions against Venezuela are going in the same direction," said Jakob Bloch, founder of Zug, Switzerland-based oil markets consultancy Petromatrix.
While the trade war with China was unresolved, U.S. economic data was still resilient, Bloch added.
"WTI has been able to break away from the ($53) range, if Brent can also break the resistance of $64, then additional technical momentum could provide another layer of support."
But the about-20% recovery in crude prices this year also suggest that U.S. oil drilling, which is biased toward higher prices, could spike if current trends continue.
The U.S. oil rig count has also been volatile lately, rising by 10 and falling by 21 in the previous two weeks. While the current figure of 847 rigs may mark a nine-month low, it was still higher from a year ago, when just 765 rigs were active.
The parsing of latest earnings calls and profits of top U.S. energy firms in the prolific Permian shale basin also indicate that drilling could spike if prices continue to climb.
ConocoPhillips (NYSE:COP) Chairman and Chief Exective Officer Ryan Lance said during last week's earnings call that while the company was committed to giving 30% cash back to shareholders, drilling will be determined by “where the commodity price for the market is".
It was a somewhat similar story at Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), two of the world's largest oil producers. Having missed the first stage of the shale boom in the Permian basin, they pumped a staggering total of 677,000 barrels of oil and gas per day in the fourth quarter, close to a fifth of the region's total oil production.
Both companies posted improved quarterly earnings on Friday that showed double-digit percentage increases in their production.