Oil prices surged to a two-month high as China trade truce offers trillion-dollar buying spree to defuse trade tensions with the United States.
Futures climbed 3.3% in New York to cap the third straight weekly increase. China has proposed a six-year shopping spree for American goods as a trade truce. This reduces concerns about a halt on economic growth. Meanwhile, U.S. factory output surges in 10 months. The International Energy Agency(IEA) forecasts another year of growth in oil demand.
Signs of progress on trade “have greased the wheels in commerce globally,” Bob Iaccino, chief market strategist at Chicago-based Path Trading Partners, said in an interview. “The perception of diminished demand which was turning up in the economic numbers is turning around, and that’s going to bring the speculators back.”
OPEC drops production rate
After ending 2018 in bearish, oil is off to its best start for a year since 2001. As oil prices surges 18% since the start of January, worries about a global oversupply starts to fade. According to data released this week, OPEC production fell by the most in two years last month – after the cartel and other top exporters agreed to limit their output. In America, explorers slowed drilling this week by the biggest margin in almost three years.
West Texas Intermediate crude (WTI) for February delivery rose $1.73 to settle at $53.80/bbl on the New York Mercantile Exchange.
Brent for March settlement advanced 2.5% to close at $62.70 the London-based ICE Futures Europe exchange. The global benchmark crude traded at an $8.66 premium to WTI for March last year.
Crude demand is on course to grow this year, supported by lower prices, the Paris-based IEA said on Friday. Schlumberger Ltd. offered more reassuring news for those worried about an oversupply of U.S. crude. It reported that the American shale drillers were likely to slow activity in the coming year as their finances come under pressure.According to a report by OPEC’s secretariat, production from OPEC’s members sank by 751,000 bpd last month. It is the biggest cut ever since the organization kicked off a previous round of curbs in early 2017.
“OPEC’s releasing information on how much they’ve cut, and Saudi Arabia keeps talking about how much more they’re going to cut,”
Ellen Wald, president of Transversal Consulting – an energy and geopolitics consultancy in Jacksonville, Florida.
“Prices are likely to keep climbing at least until April,” she said. When the U.S. is due to decide whether to extend waivers against sanctions for buyers of Iranian oil.
News source: Link