By Julia Payne
LONDON (Reuters) – Oil prices rose by around 2% on the last day of the year, reflecting gains in equity markets, but were on track for the first annual decline in three years, between persistent concerns of persistent oversupply.
Signs of progress on a possible trade agreement between China and the United States, with US President Donald Trump who said he had a "good invitation" with Chinese President Xi Jinping, helped to strengthen the sentiment for oil.
Brent crude futures climbed 83 cents to $ 54.05 a barrel by 0932 GMT, after rising above $ 1 a barrel in initial trade to a maximum of $ 54,55 a barrel.
West Texas Intermediate (WTI) US crude futures were $ 45.99 a barrel, up 66 cents, or 1.4 percent, from their last close. WTI also rose more than $ 1 in early trading, reaching $ 46.38 a barrel.
Both contracts fell by over one third this quarter, the most pronounced decline since the fourth quarter of 2014.
For most of 2018, oil prices are rising, driven by good demand and supply concerns, in particular the impact of the renewed US sanctions against the major Iran producer, introduced to the # Beginning of November.
Brent crude, considered a global benchmark for oil prices, grew by almost a third between January and October, reaching a maximum of $ 86.74 a barrel.
This was the highest level since the end of 2014, the beginning of a deep market crisis due to oversupply and many analysts and key players have said they expect crude oil to reach 100 again dollars per barrel by the end of 2018.
Instead, Brent prices have wiped out all the gains of 2018, plunging almost 40% from the top of the year, into what has been one of the steepest sell-offs in the oil market in recent decades.
The crisis came after Washington granted derogations of unexpectedly generous sanctions to Iran's major oil buyers and concerns about a global economic slowdown in the context of the Sino-US trade dispute have eroded the prospects for oil demand.
"It was Iran's bailout to break the bubble that was the crude oil market," said Sukrit Vijayakar, director of Trifecta energy consulting.
"For the immediate future, in the absence of something new, the first point of pressure for the oil markets will come around May 2019 or a month earlier when we discuss the" extensions of (Iranian) derogations ".
The current downward pressure on oil prices is expected to decline starting in January, analysts say, as the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia begin to curb production 1.2 million barrels per day (bpd).
The market, however, could still remain under the pressure of swelling production in the United States, which has emerged as the world's largest producer of crude oil this year, pumping 11.6 million barrels per day.
"The leading swing manufacturers within OPEC + have significant unused capacity and are able to use it if they deem it necessary, but nevertheless it is a difficult tool to use correctly in a world where meteorologists tend to underestimate US production of several hundred thousand barrels a day, "said JBC Energy on a daily note.
Outside the United States, production in Russia and Saudi Arabia has also reached record levels this year.
(Reporting by Koustav Samanta and Henning Gloystein in Singapore, Editing by Richard Pullin, Christian Schmollinger and Adrian Croft)
