Oil prices hold near three-month highs

Wind turbines operate at sunrise in the Permian Basin oil and natural gas production area in Big Spring, Texas, US. (Reuters/File)
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Updated 16 December 2019

Oil prices hold near three-month highs

  • The rise is supported by the report of initial deal between the US and China

LONDON: Oil prices on Monday held near three-month highs, supported by last week’s announcement that an initial trade deal had been reached between the US and China.

Brent crude oil futures rose 10 cents or 0.15 percent to $65.32 a barrel, while West Texas Intermediate crude was down 4 cents or 0.07 percent to $60.03 a barrel.

The US and China announced on Friday a “phase one” agreement that will reduce some US tariffs in exchange for what US officials said would be a big jump in Chinese purchases of US farm products and other goods.

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

The Friday agreement averted additional tariffs on Chinese goods totaling $160 billion that the US was set to impose over the weekend.

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

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

Data from China on Monday showing industrial output and retail sales growth accelerating more than expected in November offered some support for oil prices. Investors remained cautious as growth in China was expected to slow further next year, with the government likely to set its growth target at about 6 percent in 2020 compared with 6-6.5 percent this year.

“It seems the market has now fully priced (in) the phase one 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. Brent has rallied this year, supported by production curbs by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia who this month agreed to lower supply by a further 500,000 barrels per day as of Jan. 1.

The decision, according to Saxo Bank commodity strategist Ole Hansen, “helped trigger a 25 percent increase in the combined crude long to 602,000 lots, the highest since May and the biggest one-week accumulation since December 2016.”


Saudi Arabia calls ‘urgent’ meeting of oil producers

Updated 02 April 2020

Saudi Arabia calls ‘urgent’ meeting of oil producers

  • Crude prices jump after move, which Kingdom says is part of efforts ‘to support global economy in these exceptional circumstances’

DUBAI: Saudi Arabia has called an urgent meeting of the Organization of Oil Exporting Countries and other oil exporters, to discuss restoring the “desired balance” in global energy markets.

The move — which prompted a big jump in the price of oil on global markets — is part of the Kingdom’s “constant efforts to support the global economy in these exceptional circumstances, and in appreciation of the request of the President of the USA, Donald Trump, and the request of friends in the USA,” according to a statement published by the official Saudi news agency.

Global oil prices reacted immediately. Brent crude, the Middle East benchmark, increased by 20 percent, taking it back above $30 a barrel.

The price of crude has been under pressure as a result of collapsing demand due to the coronavirus crisis, and Saudi Arabia’s determination to win market share from American and Russian producers.

During an OPEC meeting in Vienna last month, the Kingdom offered to implement further cuts in oil production but Russia refused to participate.

“Saudi Arabia would like to underscore its efforts during the past period to restore balance in the oil market, as it drew support for that from 22 counties of the OPEC+, but it was not possible to reach an agreement or get consensus,” according to the official Saudi statement.

Oil industry expert Daniel Yergin said: “This represents a recognition of how much the world has changed for oil in a single month as demand falls away so dramatically, and the impact of Donald Trump becoming personally engaged.”

The Saudi call for talks came after a hectic round of communications between the US, Russia and the Kingdom.

In a message posted on Twitter after the Saudi announcement, Trump wrote: “I just spoke to my friend Mohammed bin Salman, crown prince of Saudi Arabia, who spoke with President Putin and I expect and hope that they will be cutting back approximately 10m barrels, and maybe substantially more, which will be great for the oil and gas industry.”

However, officials in Riyadh downplayed any suggestion of a commitment to specific reductions in the levels of oil output. There is no indication yet of when the “urgent” meeting of OPEC and others might happen, nor what will be on the agenda, they said.

President Vladimir Putin denied that he had spoken to the crown prince about the price of oil. Novosti, the official Russian news agency, said there was no such conversation, but added that the president had discussed falling oil prices with other OPEC members and with the US.

“The Americans are worried because of their profitability for shale oil production,” said Putin. “This is also a difficult test for the American economy.”

This week, Saudi Arabia produced more oil in a single day than at any time in its history, with 12 million barrels flowing from pumps at Saudi Aramco, the world’s biggest oil company.