Oil pared a weekly gain as investors weighed signs of progress in the prolonged US-China trade war that’s undermined global crude demand.
While futures in New York lost 0.4 per cent on Friday, oil is still up 1.3 per cent for the week. The US and China have agreed to roll back tariffs on each other’s goods in phases as they work toward a deal, according to both sides. Renewed trade optimism offset swelling American crude inventories and indications OPEC and its allies won’t make deeper cuts to supply.
Oil is still down about 14 per cent since an April peak as the trade spat sapped crude consumption and global supplies expanded. The Organization of Petroleum Exporting Countries and its partners will likely keep output steady when they meet next month as markets are on track to re-balance, according to Goldman Sachs Group and Trafigura Group.
An announcement on a complete phase one trade deal “would send oil prices significantly higher,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney, predicting West Texas Intermediate crude could climb as high as $65 (Dh239). “But as we’ve seen many times, trade-talk sentiment reverses very sharply and we are vulnerable to further falls in the near term.”
WTI for December delivery declined 24 cents to $56.91 a barrel on the New York Mercantile Exchange as of 11:18 a.m. Singapore time. The contract rose 80 cents to $57.15 on Thursday.
Brent for January settlement fell 12 cents, or 0.2 per cent, to $62.17 a barrel on the London-based ICE Futures Europe Exchange. The contract is up 0.8 per cent this week. The global benchmark crude traded at a $5.26 premium to WTI.
Rolling back tariffs would pave the way for a de-escalation in the trade war that’s cast a shadow over the world economy. China’s key demand since the start of negotiations has been the removal of punitive tariffs, which by now apply to the majority of its exports to the US.
OPEC and its partners are more likely to stick to their current output targets and encourage members to comply more fully when they meet next month, according to delegates across the coalition. While demand for commodities is “terrible,” non-OPEC supply growth is slowing as excessive capital expenditure diminishes, Goldman’s head of commodities research Jeff Currie said Thursday at the Bloomberg Commodity Investor Forum in London.
