US West Texas Intermediate (WTI) crude futures were at $51.09 a barrel, up 58c, or 1.2%.
“The impact of Opec+ (Opec and others including Russia) cuts, Iran sanctions and lower month-on-month growth in US production should help to support oil prices from current levels,” US bank JP Morgan said in a note.
The Middle East-dominated producer club of Opec and some non-Opec allies, including Russia, agreed in late 2018 to cut supply to rein in a global glut.
Meanwhile, the US last November re-imposed sanctions against Iran’s oil exports. Although Washington granted sanctions waivers to Iran’s biggest oil customers, mostly in Asia, the Middle Eastern country’s exports have plummeted since.
“Iranian exports have already fallen sharply and are likely to remain at around 1.3 million barrels a day in 2019, 1.3 million barrels a day down vs their first half of 2018 average,” HSBC said in its 2019 oil market outlook.
While Opec and Russia cut supply and Iran is restrained by sanctions, crude oil production in the US hit a record 11.7-million barrels a day late last year.
The surging output increasingly allows US oil producers to export crude, including to top importer China.
Three cargoes of US crude are currently heading to China from the US Gulf Coast, the first departures since late September and a 90-day pause in the two countries’ trade war that began last month.
The tankers are scheduled to arrive at Chinese ports between late January and early March, according to shipbrokers and vessel-tracking data.
Looming over oil and financial markets, however, is an economic slowdown.
Tuesday’s oil price increases came after crude futures fell by more than 2% the previous session, dragged down by weak Chinese trade data which pointed to a global economic slowdown.
“The outlook for the global economy continues to be highly uncertain,” HSBC said.
The bank said it had cut its average 2019 Brent crude oil price forecast by $16 a barrel, to $64 a barrel, citing surging US production and an “increasingly uncertain demand backdrop”.