Oil rises above $62 on hopes for US-China trade deal

Women walk past a wall displaying Chinese and Western graffitis outside a shopping mall in Shenzhen, China’s Guangdong province. (AP)
Updated 08 November 2019

Oil rises above $62 on hopes for US-China trade deal

  • Hopes rise for end to tariff dispute that has weighed on economic growth and demand for fuel

LONDON: Oil rose above $62 a barrel on Thursday after China hinted at progress toward a trade deal with the US, raising hopes for an end to a long dispute that has weighed on economic growth and demand for fuel.

China and the US have agreed in the past two weeks to cancel tariffs in different phases, the Chinese Commerce Ministry said on Thursday.

The trade dispute has
prompted analysts to lower forecasts for oil demand and raised concerns that a supply glut could develop in 2020. Oil fell on Wednesday, partly because of worries that a US-China trade deal might be delayed.

“Today we start with a different set of headlines that they came to some agreement on the framework,” said Olivier Jakob, oil analyst at Petromatrix. “That is definitely what is supporting prices.”

Brent crude, the global benchmark, rose 76 cents to $62.50 a barrel by 1444 GMT after settling down $1.22 on Wednesday. West Texas Intermediate crude climbed 92 cents to $57.27.

Beijing’s comments boosted market sentiment, which had also been ruffled by Wednesday’s US government supply report showing crude inventories rose last week by 7.9 million barrels, much more than expected by analysts.

Brent has rallied 15 percent in 2019, supported by a deal between the Organization of the Petroleum Exporting Counties and allies such as Russia to limit supplies until March next year. The producers meet on Dec. 5-6 in Vienna to review the policy.

OPEC Secretary-General Mohammad Barkindo said this week he was more optimistic about the outlook for 2020 because of developments on trade disputes, appearing to downplay any need to cut output more deeply.

Still, doubts about a trade deal could resurface, analysts said. Reuters reported on Wednesday a meeting between US President Donald Trump and Chinese President Xi Jinping to sign the deal could be delayed to December, contributing to oil’s decline.

“Doubts are not yet turning into full-blown concerns,” said Craig Erlam, analyst at brokerage OANDA. “If a date isn’t set in stone soon though, that may come.”


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.