Brent crude oil prices increased on the back of a supply cut agreement reached by OPEC and some non-affiliated suppliers, but the price outlook for next year has weakened due to an economic slowdown.

International benchmark Brent crude oil futures increased by 36 cents a barrel, or 0.6%, to trade at $62.03, Reuters reported.

On 6 December, the producer cartel OPEC and other producers, including Russia, agreed to reduce production by 1.2 million barrels per day (Mbpd) from next month. The proposed plan includes an 800,000bpd reduction by OPEC members and 400,000bpd by non-affiliated countries.

“The surge in US supply in recent months should be a reason for caution.”

Traders stated that Brent futures were also lifted by the shutdown of the 315,000bpd Repsol-operated El Sharara oilfield in Libya following protests by tribesmen.

Meanwhile, US West Texas Intermediate (WTI) crude futures fell 10 cents to stand at $52.51 per barrel. The WTI prices were pulled down by soaring US production.

The news agency quoted Bank of America Merrill Lynch as saying: “The surge in US supply in recent months should be a reason for caution.”

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Responding to the announcement of supply cuts, Morgan Stanley said the cut was ‘likely sufficient to balance the market in 1H19 and prevent inventories from building’.

The bank further noted that it expected Brent futures to reach $67.5 a barrel by the second quarter of next year.

Bank of America added that the proposed reduction ‘should lead to a relatively balanced global oil market and will likely push Brent and WTI prices back to our respective expected averages of $70 per barrel and $59 per barrel in 2019’.

However, Emirates NBD bank analyst Edward Bell is of the view that ‘the scale of the cuts isn’t enough to push the market back into deficit’ and that he expected ‘a market surplus of around 1.2Mbpd in Q1 with the new production levels’.

Since early October, oil prices have decreased by 30%, pulled down by signs of an economic slowdown.