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 LCOc1 climbed 47 cents, or 0.7%,
to $64.67 a barrel by 0730 GMT, its highest since September 23. West Texas
Intermediate (WTI) crude CLc1 was up 34 cents, or 0.6%, to $59.52 a barrel, the
highest since September 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 .DXY 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.
–
Reuters