By Sarah Toy 

Easing trade tensions and production cuts by the Organization of the Petroleum Exporting Countries have boosted oil prices recently, but some investors remain dubious that even those long-awaited developments will be enough to push crude beyond its recent trading range.

U.S. crude prices hit a three-month high on Friday after the U.S. and China signaled they had reached a limited trade agreement that helped ease investors' worries that slowing global growth would hurt demand. A week earlier, OPEC and its Russia-led allies agreed to new crude-production cuts, which also boosted prices.

Yet both rallies quickly stalled. Optimism about the trade pact fizzled Friday afternoon, with U.S. crude prices paring gains from earlier in the day to settle up 1.5% for the week at $60.07 a barrel. And some doubt that the OPEC cuts -- which would hold back a total of around 1.7 million barrels a day from global oil markets and deepen the current curb of 1.2 million barrels a day -- will meaningfully reduce global supplies in the coming year.

While those production cuts could boost oil prices in 2020, some energy experts are skeptical about whether they will. Saudi Arabia agreed to reduce output by 167,000 barrels a day to 10.151 million, but the kingdom already produces an estimated 400,000 barrels a day less than its previous quota. And some OPEC members, including Nigeria and Iraq, have struggled with curbing supply, making it difficult to gauge how effective the cuts will be.

"Why would they change next year just because they made a pledge?" said Giovanni Staunovo, commodities analyst at UBS Global Wealth Management.

Oil prices remain well below their April highs, weighed down by concerns of oversupply and waning demand caused by slowing global growth, even after the initial trade agreement between the U.S. and China eased some growth worries.

"The upside to prices is limited," said Robert Yawger, director of the futures division at Mizuho Securities USA. "There is just so much supply out there."

OPEC and the U.S. Energy Information Administration signaled Wednesday that global oil supply would likely remain robust going into next year. The cartel left its world oil-demand growth estimates for 2019 and 2020 unchanged and forecast that non-OPEC supply would stay strong next year. The same day, the EIA reported another weekly rise in domestic crude inventories, defying analysts' predictions of a drawdown and marking a sixth week of increases out of the past seven.

Rob Thummel, senior portfolio manager at the energy investment firm Tortoise, said it is slowly moving its investments -- still largely in oil and gas -- toward global electricity providers and infrastructure. Neither the OPEC cuts nor the trade deal has persuaded the firm to pull back on that, he said.

"It didn't change our investing perspective and how we're positioning our clients," he said. "Nothing caused us to change our mind and catapult oil-demand growth to the top of our list in terms of investments we're planning on making."

He also noted the relatively brief duration of the OPEC cuts. "If OPEC really wanted to boost prices, they should have run the cuts through the entirety of 2020," he said. "The fact that they are re-evaluating in March -- that's causing some uncertainty."

For others, the OPEC cuts and trade deal signal a strong year ahead for oil prices.

"The deal is very constructive for oil prices looking into 2020, especially when combined with the very firm backing from OPEC," said Gary Ross, chief executive of Black Gold Investors LLC, who is betting on exploration-and-production companies.

Another bullish sign, according to Mr. Ross: a postelection surge in the British pound that is weighing on the U.S. dollar. Oil is bought and sold in the U.S. currency, so oil prices often move in the opposite direction of the dollar.

Net bets on higher U.S. crude prices by hedge funds and other speculative investors jumped to their highest level since May during the week ended Dec. 10, Commodity Futures Trading Commission data show. Net bullish bets, however, are still well below their April peaks.

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Write to Sarah Toy at sarah.toy@wsj.com

(END) Dow Jones Newswires

December 16, 2019 08:14 ET (13:14 GMT)

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