Oil hovers near three-month highs on trade deal progress, set for third weekly rise

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Reuters
KEY POINTS
  • Brent futures were up 5 cents, or 0.08%, to 66.59 a barrel by 0242 GMT.
  • U.S. West Texas Intermediate was down 8 cents, or 0.13%, at $61.10 per barrel.
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A general view of the Novokuibyshev Refinery owned by Rosneft oil company on March 15, 2012 in Novokuibyshevsk, Samara region, Russia.
Sasha Mordovets | Getty Images

Oil prices held steady near three-month highs on Friday, heading for a third consecutive weekly rise, on the back of easing China-U.S. trade tensions that have weighed on demand as well as the global economic growth outlook.

Brent futures were up 5 cents, or 0.08%, to 66.59 a barrel by 0242 GMT, while U.S. West Texas Intermediate was down 8 cents, or 0.13%, at $61.10 per barrel.

Progress in a long-running trade dispute between the United States and China, the world’s two biggest oil consumers, has boosted expectations for higher energy demand next year.

China on Thursday announced a list of import tariff exemptions for six oil and chemical products from the United States, days after the world’s two largest economies announced an interim trade deal set to be signed at the beginning of January.

“A world with less uncertainty (following last week’s proposed U.S.-China trade agreement) was the real driver of the market optimism on the 2020 outlook,” ANZ Research said in a note.

JP Morgan and Goldman Sachs raised its 2020 oil price outlook earlier this week amid OPEC-led output cuts and an improved global trade outlook.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia agreed in early December to make a further cut of 500,000 barrels per day (bpd) from Jan. 1 on top of previous reductions of 1.2 million bpd.

The trade deal progress aside, a drop in U.S. crude inventories also supported oil prices to hold near three-month highs.

“Crude prices continued their stellar performance into year-end, nudged along by the more benevolent inventory data published by the EIA,” said Stephen Innes, market strategist at AxiTrader.

“Product demand is up, and with a more constructive global growth outlook than at any time of this year, oil markets remain supported by the fundamental backdrop,” Innes added.

U.S. crude oil stockpiles fell by 1.1 million barrels to 446.8 million barrels in the week to Dec. 13, the Energy Information Administration (EIA) said on Wednesday.

ANZ Research also said “an expected fall in U.S. drilling activity should support oil prices.”

A U.S. weekly drilling report by energy services firm Baker Hughes is due to be released on Friday. U.S. drilling firms added 4 oil rigs in the week to Dec. 13, bringing the total count to 667.

Oil prices hit highest in 3 months as US-China trade deal takes shape

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Reuters
KEY POINTS
  • Brent futures climbed 43 cents, or 0.7%, to $64.63 a barrel by 0426 GMT, its highest since Sept. 23.
  • West Texas Intermediate (WTI) crude was up 31 cents, or 0.5%, to $59.49 a barrel, the highest since Sept. 16.
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Deck hands on a natural gas drilling rig on June 6, 2007, outside of Artesia, in eastern New Mexico.
Robert Nickelsberg | Getty Images News | Getty Images

Oil prices extended gains on Friday, scaling three-month highs as the United States and China moved closer to a resolution to the 18-month trade war between the world’s two biggest economies that has raised big questions about global demand for crude.

Brent futures climbed 43 cents, or 0.7%, to $64.63 a barrel by 0426 GMT, its highest since Sept. 23.

West Texas Intermediate (WTI) crude was up 31 cents, or 0.5%, to $59.49 a barrel, the highest since Sept. 16.

“Risk appetite ran wild after Trump signaled the he made a deal with China and that will only be positive for global demand forecasts for crude,” said Edward Moya, senior market analyst at OANDA.

A slump in the U.S. dollar against the backdrop of a strong pound also helped to boost commodity prices, said Margaret Yang, market analyst at CMC Markets.

Mirroring investor optimism, Asian share markets jumped to multi-month highs on Friday after Wall Street surged to record highs on Thursday.

“If we see even further progress with the U.S.-China trade war, we could see global GDP rise by half a percentage point in 2020 and that would do wonders for crude demand forecasts,” said Moya.

While a trade deal that would end uncertainty could provide a shot in the arm for oil demand in the near term, concerns continue to hover about the demand profile amid ample supplies going forward.

“Lingering doubts about demand will cap the upside on prices,” said ANZ Bank in a note on Friday.

In the meantime the White House has agreed to suspend some tariffs on Chinese goods and reduce others in return for Beijing’s pledge to hike purchases of U.S. farm products in 2020, sources said on Thursday.

But the White House didn’t release any official statement, raising questions about whether the terms had been agreed by both sides.

Looking further ahead, an International Energy Agency report on Thursday pointed to future pressure on oil prices, predicting a sharp rise in global inventories despite an agreement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to deepen output cuts.

That contrasts with OPEC’s own research, which forecasts a small deficit in the market next year due to Saudi Arabia’s supply restraint even before the latest cut agreement takes effect.

Elsewhere, Norway’s oil output in November hit a 32-month high at 1.71 million barrels per day, the Norwegian Petroleum Directorate (NPD) said on Thursday.

“While the current (U.S.-China) trade deal will most probably limit demand devastation, it might not be enough to counter an oversupplied market in early 2020, hence the possible reason we are not seeing a massive bounce in oil prices now,” said Stephen Innes, market strategist at AxiTrader.

Oil prices gain as OPEC revises deficit forecast

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KEY POINTS
  • Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.
  • West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.
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Oil field workers with Wisco work on a pump jack in North Dakota, the United States, on November 6, 2013.
Ken Cedeno | Corbis News | Getty Images

Oil prices edged higher on Thursday with the market mood switching to relief as OPEC forecast a supply deficit next year, from doom and gloom over data showing a surprise increase in U.S. crude inventories.

Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.

West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought — even before the latest pact with other producers to curb supply takes effect.

The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as U.S. production growth begins to slow.

Still, U.S. inventories are on the rise. Crude stockpiles last week rose unexpectedly, gaining more than 800,000 barrels, compared with a Reuters poll that forecast a 2.8 million barrel decline.

Inventories of petroleum products also increased with gasoline stocks surging by more than 5 million barrels and distillates gaining a bit over 4 million barrels — with both more than double expectations.

“The overall report was very bearish as demand fell off a cliff and total stockpiles climbed to the highest level in seven months,” said Edward Moya, senior market analyst at OANDA.

Beyond the balance between inventories and supply, investors are also awaiting news on negotiations between Washington and Beijing to end a long-running trade war and get an agreement before another round of U.S. sanctions kicks in.

The lingering battle between the world’s two biggest economies has hit global growth, in the process denting demand for crude and oil products.

U.S. President Donald Trump is expected to discuss tariffs on Chinese goods set to be imposed on Dec. 15 with top trade advisers as markets brace for fallout in China’s reaction.

“In the near-term, U.S.-China trade remains the primary catalyst and the 500-pound gorilla in the room,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Oil prices wilt on surprise build-up in US crude stocks

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KEY POINTS
  • Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT.
  • U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.
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A photo taken on August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices fell on Wednesday after industry data showed an unexpected build in crude inventory in the United States and as investors waited for news on whether a fresh round of U.S. tariffs on Chinese goods would take effect on Sunday.

Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT. U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.

“At this time, everyone was expecting we would have strong draws in the inventory, but it was a build,” said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp.

U.S. crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.

Crude inventories rose by 1.4 million barrels in the week to Dec. 6 to 447 million, while analysts were expecting a fall of 2.8 million barrels.

The weekly EIA report is due later on Wednesday.

U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching fast.

With the market expected to be over-supplied next year on growing shale oil output and new projects coming on stream, any additional tariffs will dent demand and, in turn, prices, said Mitsubishi’s Nunan.

“The big question is how will the demand hold up?” he said.

“The demand slowdown in growth, a lot of it seems to be coming from the (U.S.-China) trade war. If tariffs go into effect, sentiments will turn bearish again.”

The U.S. is on track to become a net exporter of crude and fuel for the first time on record on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.

Also adding to global supply, U.S. producers Exxon Mobil and Hess plan to export the first-ever shipments of crude oil from Guyana between January and February, a milestone for Latin America’s newest oil producer, sources with knowledge of the plans said.

Elsewhere, Venezuela’s crude output in November jumped more than 20% from the prior month to the highest level since the United States tightened sanctions on state oil company PDVSA in August, two people with knowledge of PDVSA data said this week.

Investors are also eyeing other major events this week including the British election on Thursday and U.S. and European Central Bank meetings for further trading cues.

Oil prices recoil as specter of trade war, weaker demand haunts market

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Reuters
KEY POINTS
  • Brent futures were down 14 cents, or 0.2%, at $64.11 per barrel by 0450 GMT.
  • West Texas Intermediate oil futures were 13 cents, or 0.2%, lower to $58.89 a barrel.
  • The benchmarks fell 0.2% and 0.3% respectively on Monday.
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Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
Benjamin Lowy | Getty Images

Oil prices slipped on Tuesday for a second straight session as the cons of a slowing global demand outlook outweighed the pros of OPEC’s agreement with associated producers at the end of last week to deepen crude output cuts in early 2020.

Brent futures were down 14 cents, or 0.2%, at $64.11 per barrel by 0450 GMT. West Texas Intermediate oil futures were 13 cents, or 0.2%, lower to $58.89 a barrel. The benchmarks fell 0.2% and 0.3% respectively on Monday.

“The euphoria (on output cuts) was short lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict,” said ANZ Bank in a note on Tuesday.

Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.

That weakness came amid fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast: Washington’s next round of tariffs against some $156 billion Chinese goods are scheduled to take effect on Dec. 15.

U.S. President Donald Trump does not want to implement the next round of tariffs, U.S. Agriculture Secretary Sonny Perdue said on Monday — but he wants “movement” from China to avoid them.

“With the swathe of new tariffs due to kick in on 15 December, the market is watching negotiations closely,” said ANZ.

Analysts said that, though overshadowed for now, the move by “OPEC+” — the Organization of the Petroleum Exporting Countries (OPEC) and associated producers like Russia — to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd would remain a mid-term support factor.

But rising non-OPEC production threatens to counteract efforts to limit global crude supplies.

“Despite the voluntary restraint from OPEC, world oil markets remain well supplied … with non-OPEC output expected to rise by well over 2 million bpd next year, with big increases in the U.S., Brazil, and Norway,” said Henning Gloystein, director of global energy and natural resources at Eurasia Group in a note.

U.S. crude oil output recently hit a record of 13 million bpd and is expected to rise further in 2020.

“Going forward, oil prices are likely to be more data-driven, and move in tandem with demand forecasts,” said Margaret Yang, market analyst at CMC Markets.