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Oil drops on concerns of economic downturn, but OPEC cuts support

Oil drops on concerns of economic downturn, but OPEC cuts support
FILE PHOTO: A pump jack operates in the Permian Basin oil production area near Wink, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo -
Nick Oxford(Reuters)
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By Henning Gloystein

SINGAPORE (Reuters) - U.S. oil prices fell on Friday after the United States showed signs of following Asia into an economic slowdown, although crude supply withdrawals by producer club OPEC prevented prices from dropping even further.

U.S. West Texas Intermediate (WTI) crude oil futures <CLc1> were at $46.82 per barrel at 0024 GMT, down 27 cents, or 0.6 percent, from their last settlement.

International Brent crude futures <LCOc1> had yet to trade.

Data from the Institute for Supply Management (ISM) on Thursday showed U.S. factory activity slowed more than expected in December, mirroring similar data releases in Asia over the past week.

The slowdown comes over concerns that the trade war between the United States and China will drag down economic growth, triggering a surge in volatility and sending major stock markets deep into the red.

Despite this, oil prices are expected to receive some support as supply cuts announced late last year by the Organization of the Petroleum Exporting Countries (OPEC) start to kick in.

OPEC oil supply fell by 460,000 barrels per day (bpd) between November and December, to 32.68 million bpd, a Reuters survey found on Thursday, as top exporter Saudi Arabia made an early start to a supply-limiting accord, while Iran and Libya posted involuntary declines.

OPEC, Russia and other non-members - an alliance known as OPEC+ - agreed last December to reduce supply by 1.2 million bpd in 2019 versus October 2018 levels. OPEC's share of that cut is 800,000 bpd.

"If OPEC is faithful to its agreed output cut together with non-OPEC partners, it would take 3-4 months to mop up the excess inventories," energy consultancy FGE said.

Considering the planned cuts versus ongoing increases in U.S. crude production, which hit a record 11.7 million bpd by late 2018, FGE said it expected Brent prices to range between $55-$60 per barrel in the first months of 2019.

(Reporting by Henning Gloystein; editing by Richard Pullin)

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