Oil gains after US-China trade deal and a rise in crude inventories

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Reuters
KEY POINTS
  • Oil prices rose on Thursday after the signing of an initial trade deal that sets the stage for a surge in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.
  • Brent was 45 cents, or 0.7%, higher at $64.45 a barrel by 0310 GMT.
  • U.S. crude was up by 39 cents, or 0.7%, at $58.20 a barrel.
RT: Oil drilling rig oil workers Midland, Texas 190219 1
A drilling crew secures a stand of drill pipe into the mouse hole on a drilling rig near Midland, Texas February 12, 2019.
Nick Oxford | Reuters

Oil prices rose on Thursday after the signing of an initial Sino-U.S. trade deal that sets the stage for a surge in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.

Brent was 45 cents, or 0.7%, higher at $64.45 a barrel by 0310 GMT, while U.S. crude was up by 39 cents, or 0.7%, at $58.20 a barrel.

Under the so-called Phase 1 deal to call a truce in a trade war between the world’s two biggest economies, China committed to buying over $50 billion more of U.S. oil, liquefied natural gas and other energy products over two years.

“It was a formal signing of something which had already been agreed, but that has certainly boosted sentiment,” said Virendra Chauhan, oil analyst at Energy Aspects.

Trade sources and analysts said China could struggle to meet the target and gains in oil are likely to be limited ahead of more detail on how the commitments will be achieved.

Official U.S. data showing a much bigger than expected drop in crude oil inventories, also helped underpin prices, Chauhan said.

“They were slightly constructive. We saw a counter-seasonal draw in U.S.crude stocks and that generally is supportive,” he said.

Oil inventories fell by 2.5 million barrels, compared with analyst expectations of a drop of 500,000 barrels, according to data from the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.

Nonetheless, gasoline stocks rose by 6.7 million barrels and distillate stocks were up by 8.2 million barrels, according to the EIA.

U.S. crude production also rose to a record 13 million barrels per day, the agency said.

Oil prices are returning to range trading, analysts said, as the threat of conflict between Iran and the U.S. receded further after they traded missile and drone attacks earlier this month.

That sent Brent to highs above $71 a barrel, before prices touched more than one-month lows in advance of the signing of the U.S.-China deal.

Oil drops on concerns that US-China trade deal may not stoke demand

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Reuters
KEY POINTS
  • Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world’s biggest oil users, may not boost demand.
  • Brent crude was down 19 cents, or 0.3%, at $64.30 per barrel by 0428 GMT.
  • U.S. West Texas Intermediate crude futures were down 19 cents, or 0.3%, at $58.04 a barrel.
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A policeman is seen at West Qurna-1 oil field, which is operated by ExxonMobil, in Basra, Iraq January 9, 2020.
Essam al-Sudani | Reuters

Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world’s biggest oil users, may not boost demand as the U.S. intends to keep tariffs on Chinese goods until a second phase.

U.S. Treasury Secretary Steven Mnuchin said late on Tuesday that tariffs on Chinese goods will remain in place until the completion of a second phase of a U.S.-China trade agreement, even as both sides are expected to sign an interim deal later on Wednesday.

Brent crude was down 19 cents, or 0.3%, at $64.30 per barrel by 0428 GMT. U.S. West Texas Intermediate crude futures were down 19 cents, or 0.3%, at $58.04 a barrel.

“A pickup with global demand for crude may struggle as U.S.-Chinese tensions linger after some hardline stances from the Trump administration,” said Edward Moya, analyst at brokerage OANDA.

“Financial markets are disappointed that the Trump administration … signalled tariffs will remain in place until after the 2020 U.S. Presidential election, depending on whether China comes through on their promises with the phase-one agreement.”

U.S. President Donald Trump is slated to sign the Phase 1 agreement with Chinese Vice Premier Liu He at the White House on Wednesday. That agreement is expected to include provisions for China to buy up to $50 billion more in U.S. energy supplies.

Adding to worries over U.S.-China trade relations, the U.S. government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to Chinese technology giant Huawei, according to two sources.

Meanwhile, U.S. crude inventories rose by 1.1 million barrels, data from the American Petroleum Institute showed, countering expectations for a draw.

U.S. oil production is expected to rise to a record of 13.30 million barrels per day in 2020, mainly driven by higher output in the Permian region of Texas and New Mexico, the U.S. Energy Information Administration (EIA) said.

Oil steady amid optimism U.S.-China close to signing trade deal

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Reuters
KEY POINTS
  • Oil prices were mostly steady on Monday after three weeks of gains.
  • U.S. drillers may be anticipating higher prices as well and last week increased the number of their oil rigs by the most in a week since February 2018.
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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 were mostly steady on Monday after three weeks of gains amid optimism the United States and China were close to signing a trade deal to end a tariff war, with President Donald Trump saying an agreement would be signed “very shortly.”

Brent crude was down 4 cents at $66.10 a barrel by 0100 GMT. West Texas Intermediate was also down 4 cents at $60.40 a barrel.

A so-called phase one deal was announced earlier in December as part of a bid to end the months-long tit-for-tat trade war between the world’s two largest economies, which has sent shockwaves through markets and roiled global growth.

The United States is to agree to reduce some tariffs in return for a big increase in purchases by Chinese importers of American farm products, according to the deal that is due to be signed in January.

“We just achieved a breakthrough on the trade deal and we will be signing it very shortly,” Trump said at a Turning Point USA event in Florida on Saturday.

The easing of tensions has improved business confidence and boosted the outlook for economic growth and energy demand.

“Oil prices will continue to benefit from the positive developments in the U.S.-China trade,” said Stephen Innes, chief Asia market strategist at AxiTrader.

“With a more constructive global macro outlook than at any time in the last year, oil is well-supported by both fundamental factors and sentiment now,” he said.

U.S. drillers may be anticipating higher prices as well and last week increased the number of their oil rigs by the most in a week since February 2018.

Drillers added 18 oil rigs in the week to Dec. 20, bringing the total to 685, the most since November, Baker Hughes, an energy services company, said in its weekly report.

U.S. economic growth nudged up in the third quarter, latest data shows, and the economy appears to have maintained the moderate pace of expansion as the year ended, supported by a strong labor market.

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.
GP: Rosneft oil refinery Russia 190125
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 fall as investors seek clarity on US-China trade deal

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Reuters
KEY POINTS
  • Brent crude oil futures fell 22 cents, or 0.3% to $65.00 a barrel by 0400 GMT.
  • West Texas Intermediate crude was down 23 cents or 0.4% to $59.84 a barrel.
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Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 5, 2018.
Benjamin Lowy | Getty Images News | Getty Images

Oil prices on Monday slid off near three-month highs hit last week as investors searched for clarity beyond the initial impact of a trade deal between the United States and China that’s expected to boost flows between the top two global economies.

Brent crude oil futures fell 22 cents, or 0.3% to $65.00 a barrel by 0400 GMT, while West Texas Intermediate crude was down 23 cents or 0.4% to $59.84 a barrel.

The United States and China cooled long-simmering trade tensions on Friday, announcing a “phase one” agreement that reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods.

“It seems the market has now fully priced (in) the phase 1 trade agreement, so we are going to need further news if we are going to push through the important (technical) resistance that is just ahead,” said Michael McCarthy, chief market strategist at CMC Markets.

The Friday agreement averted additional tariffs on Chinese goods totaling $160 billion that the United States was set to impose over the weekend, but investors remained cautious as they awaited precise details of how the trade deal would work.

U.S. Trade Representative Robert Lighthizer said on Sunday the deal will nearly double U.S. exports to China over the next two years and is “totally done” despite the need for translation and revisions to its text.

China’s State Council’s customs tariff commission said on Sunday that it has suspended additional tariffs on some U.S. goods that were meant to be implemented on Dec. 15.

“What the market needs now, though, is clarity around exactly what the deal entails,” analysts from ING Economics said in a note on Monday.

“The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is.”

Data from China on Monday that showed industrial output and retail sales growth accelerating more than expected in November did offer some support for oil prices.

Still, investors remained cautious as growth in China is expected to slow further next year, with the government likely to set its economic growth target at around 6% in 2020 compared with this year’s 6-6.5%.

Brent has rallied this year, supported by efforts by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to cut production.

The alliance, known as OPEC+, has agreed to lower supply a further 500,000 barrels per day as of Jan. 1, which could boost oil prices.