Coverage: Oil prices continue to drop

Oil futures early Wednesday in New York retreated to start the new year, as concerns about global economic health continued to drive fears of flagging demand for crude.

Mark DeCambre of MarketWatch.com had the news:

West Texas Intermediate crude for February delivery lost 52 cents, or 1.2%, to $44.89 a barrel. WTI ended Monday’s session with a loss of 10.8% for December, finished down 38% over the quarter, and 24.8% for 2018, according to Dow Jones Market Data.

The global benchmark, March Brent crude meanwhile, shed 62 cents, or 1.2%, at $53.18 a barrel. The international benchmark finished Monday’s session down by more than 8% for December, 35% for the quarter, and off 19.5% for the year.

Major markets were closed on Tuesday for New Year’s Day.

Market participants were crediting fresh signs of weakness in China’s economy as a key reason for continued selling in oil and other assets considered risky.

Christopher Alessi of The Wall Street Journal reported that producers have been curbing their output:

Oil market participants will be looking closely at the impact of production curbs that took effect at the start of January from the Organization of the Petroleum Exporting Countries and its allies. OPEC and 10 producers outside the cartel, led by Russia, agreed in early December to collectively hold back crude output by 1.2 million barrels a day for the first six months of 2019, part of an effort to rein in a burgeoning supply glut that dragged down prices in the fourth quarter of 2018. The group first cut production at the start of 2017, before moving to raise it in summer 2018 and then again reversing course by the end of the year.

“Fresh OPEC-wide cuts will alleviate but not eliminate a supply imbalance in the first half of 2019,” according to Stephen Brennock, analyst at brokerage PVM Oil Associates Ltd. “Global oil inventories will therefore build in the coming months [and] this is hardly a recipe for a sustained price recovery,” he added.

Saheli Roy Choudhury of CNBC.com reported that JPMorgan predicts continued lower prices:

If the Organization of the Petroleum Exporting Countries (OPEC) does not follow through with its commitment to reduce oil production throughout this year, Brent crude prices could struggle to rise, according to J.P. Morgan’s head of Asia Pacific oil and gas.

In an early December meeting, OPEC and non-OPEC countries agreed to take about 1.2 million barrels a day off the oil market — initially for six months — starting January, amid a persistent imbalance between global oil supply and demand.

“Well, J.P. Morgan said prior to the OPEC meeting early December, that if OPEC didn’t really cut by more than around 1.2 million barrels per day, and they did just for the first half, (not) for the full year, that we could gravitate toward … our low-oil-price scenario, which is $55 Brent for 2019,” Scott Darling told CNBC’s “Squawk Box” on Wednesday.

On Wednesday afternoon during Asian hours, Brent traded down around 1 percent at $53.28.