Oil prices surge on hopes of successful US-China trade talks(Update 2)


  • Markets
  • Tuesday, 08 Jan 2019

Brent crude futures fell $2.66, or 4.1%, to settle at $62.40 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $2.84, or 4.8%, to settle at $56.25 a barrel, after touching their highest in more than five weeks on Monday.

SINGAPORE: Oil prices rose on Wednesday, extending gains from the previous session on hopes that Washington and Beijing can resolve a trade dispute that has triggered a global economic slowdown.

U.S. West Texas Intermediate (WTI) crude oil futures were at $50.29 per barrel as at 0131, up 51 cents, or 1 percent from their last settlement. It was the first time this year that WTI has topped $50 a barrel.

International Brent crude futures were up 42 cents, or 0.7 percent, at $59.14 per barrel.

Both crude price benchmarks had already gained more than 2 percent in the previous session.

"Crude continues to extend gains as early reports from Beijing regarding trade negotiations are fuelling optimism around successful trade talks between the U.S. and China," said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

"After a dreadful December for risk markets, Crude oil continues to catch a positive vibe," he added.

The world's two biggest economies will continue trade talks in Beijing for an unscheduled third day on Wednesday, U.S. officials said, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased U.S. access to China's markets.

State newspaper China Daily said on Wednesday that Beijing is keen to put an end to its trade dispute with the United States, but that it will not make any "unreasonable concessions" and that any agreement must involve compromise on both sides.

If no deal is reached by March 2, Trump has said he will proceed with raising tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports at a time when China's economy is slowing significantly.

Oil prices have also been receiving support from supply cuts started at the end of 2018 by a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.

"Crude oil prices continued to march higher, with investors becoming increasingly confident that the OPEC cuts would tighten the market," ANZ bank said - Reters

 Earlier update:

U.S. oil prices rise above US$50 on trade talk hopes(Update)

SINGAPORE: U.S. crude oil prices on Wednesday rose above $50 per barrel for the first time in 2019 on hopes that Washington and Beijing can resolve a trade dispute that has triggered a global economic slowdown.

U.S. West Texas Intermediate (WTI) crude oil futures were at $50.14 per barrel as at 0021, up 36 cents, or 0.7 percent from their last settlement.

International Brent crude futures had yet to trade.

"The mood was ... boosted by signs of further progress in trade talks between the U.S. and China," ANZ bank said on Wednesday.

The world's two biggest economies will continue trade talks in Beijing for an unscheduled third day on Wednesday, U.S. officials said, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased U.S. access to China's markets.

State newspaper China Daily said on Wednesday that Beijing is keen to put an end to its trade dispute with the United States, but that it will not make any "unreasonable concessions" and that any agreement must involve compromise on both sides.

If no deal is reached by March 2, Trump has said he will proceed with raising tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports at a time when China's economy is slowing significantly.

Oil prices have also been receiving support from supply cuts started at the end of 2018 by a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.

"Crude oil prices continued to march higher, with investors becoming increasingly confident that the OPEC cuts would tighten the market," ANZ said. - Reuters

 

Earlier report:

Oil prices rise over 2% on US-China trade talk optimism

NEW YORK: Oil prices rose more than 2 percent on Tuesday, supported by hopes that crude demand may rise more quickly if talks between U.S. and Chinese officials resolve the trade dispute between the world's two biggest economies.

U.S. West Texas Intermediate (WTI) crude oil futures settled up $1.26, or 2.6 percent, at $49.78 a barrel. During the session, the contract touched $49.95, the highest since Dec. 17.

Brent crude futures rose $1.39 a barrel, or 2.4 percent, to $58.72.

"The trade situation is definitely bullish; you have a good demand construction if we can wrap up this trade deal," said Bob Yawger, director of futures at Mizuho in New York.

The talks are going well so far and will continue on Wednesday, U.S. delegation member Steven Winberg said.

These are the first face-to-face meetings between officials from the two countries since U.S. President Donald Trump and Chinese President Xi Jinping agreed in December to a 90-day truce in a trade war that has buffeted global financial markets.

On Monday, U.S. Commerce Secretary Wilbur Ross and China's foreign ministry expressed optimism on resolving the dispute.

Some analysts warned, however, that tensions could flare anew.

Oil traders also worried that a possible worldwide economic slowdown could dent fuel consumption. The hedge fund industry has cut significantly its bullish positions in crude futures.

S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $10 per barrel to $55 for Brent and $50 per barrel for WTI.

"Our lower oil price assumptions reflect slowing demand and rising supply globally," said S&P Global Ratings analyst Danny Huang.

OPEC VS U.S. SHALE

Crude prices have been buoyed by supply cuts from the Organization of the Petroleum Exporting Countries including top exporter Saudi Arabia, and allies including Russia.

Saudi-based Arab Petroleum Investments Corp, which funds petroleum projects, estimated that oil prices are likely to trade at $60 to $70 per barrel by mid-2019.

Still, U.S. oil supply is surging. A steep rise in onshore shale drilling has helped make the United States the world's top producer, with crude production up 2 million barrels per day (bpd) last year to a world record 11.7 million bpd.

The market is closely watching U.S. supplies, which analysts expect pulled back 3.3 million barrels in the latest week. If government data on Wednesday confirms that forecast, it would send a strong bullish signal to the market, said John Kilduff, a partner at Again Capital Management in New York. - Reuters

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