Oil prices settle higher on trade deal optimism, central-bank stimulus
Oil futures settled higher on Thursday, nearly recouping all losses from a day earlier, following a tweet from President Donald Trump that hinted the U.S. was close to a trade deal with China.
“Getting VERY close to a BIG DEAL with China. They want it, and so do we!” Trump tweeted on Thursday, prompting a move higher in oil prices in the minutes after the tweet. A deal would ease worries about a slowdown in energy demand.
“The tweet itself was somewhat direct and bullish on the surface, but I think you have a market that is beyond fatigued in terms of the deal or no deal cycle we’ve been in for months now,” Robbie Fraser, senior commodity analyst at Schneider Electric, told MarketWatch. “For a tweet to have real impact at this point, it’s going to need to start offering details and substance rather than the latest round of speculation.”
As of Thursday afternoon, Bloomberg News reported, citing people briefed on the plans, that U.S. negotiators reached terms of a phase-one trade deal with China, which awaits Trump’s approval.
Prices already were on the rise after central banks signaled a willingness to keep interest rates low and maintain economic stimulus for the foreseeable future which may help to boost the global economy and buoy crude demand.
The Federal Reserve on Wednesday said its decision to hold benchmark interest rates unchanged in a range of 1.5% and 1.75% is at least partly due to worries about the potential harm from Sino-American trade clashes. In addition to the Fed, on Thursday the European Central Bank announced its decision to keep its main deposit rate at negative 0.5%, while maintaining its rate of asset purchases at €20 billion a month, as widely expected by analysts.
Optimism about the reception of Saudi Arabia’s behemoth oil refinery initial public offering during its second day of trading also provided a lift to oil markets, experts said.
West Texas Intermediate crude for January delivery CLF20, +0.52% picked up 42 cents, or 0.7%, to settle at $59.18 a barrel on the New York Mercantile Exchange, after trading as high as $59.72. It lost 0.8% on Wednesday.
February Brent crude BRNG20, +0.59% gained 48 cents, or 0.8%, to settle at $64.20 a barrel on ICE Futures Europe, following a 1% slide a day earlier.
“Oil prices are shaking off the snowstorm related demand drop in oil products reported by the Energy Information Administration (EIA), and are now focusing on an accommodative Federal Reserve,” while also keeping an eye on demand for Aramco shares, wrote Phil Flynn, senior market analyst at Price Futures Group, in a Thursday research report.
Saudi Arabia’s oil company Aramco surged another 10% on Saudi’s Tadawul stock exchange Thursday, triggering a limit-up halt on its shares, which is being interpreted as a reflection of continued enthusiasm for the company, which now boasts a market value of about $2 trillion.
Investors mostly have taken the share sale as an upbeat sign of the outlook for crude.
Oil trading has seen uneven moves following a meeting of members of the Organization of the Petroleum Exporting Countries and its allies last week in Vienna, where the cartel reached an agreement to cut an additional 500,000 barrels of oil a day.
Oil was under pressure Wednesday after an inventory report from the Energy Information Administration showed U.S. crude supplies edged up by 800,000 barrels for the week ended Dec. 6. Analysts polled by S&P Global Platts forecast a decrease of 2.8 million barrels, though the API reported Tuesday that U.S. crude supplies rose by 1.4 million barrels last week.
In a report issued Thursday, the International Energy Agency said it still expected global crude inventories to rise by 700,000 barrels a day in the first three months of the year, despite OPEC+ efforts to balance the market, though it did trim its 2020 non-OPEC oil supply growth forecast by 200,000 barrels a day to 2.1 million barrels a day.
OPEC, in a monthly report Wednesday, left its expectations for world oil demand growth unchanged from its previous report, at 0.98 million barrels a day for 2019 and at 1.08 million barrels a day for 2020. The report also forecast non-OPEC oil supply growth at 1.82 million barrels per day, also unchanged from last month’s report.
Back on Nymex, prices for petroleum products also rose, with January gasoline RBF20, +0.74% adding 0.1% to $1.6283 a gallon and January heating oil HOF20, +0.50% up 1.1% to $1.9508 a gallon.
January natural gas NGF20, -0.09% rose 8.5 cents, or 3.8%, to settle at $2.328 per million British thermal units.
The EIA Thursday that domestic supplies of natural gas fell by 73 billion cubic feet for the week ended Dec. 6. That was generally in line with the average fall of 74 billion cubic feet expected by analysts surveyed by S&P Global Platts.
As seen on www.marketwatch.com, Written by Myra P. Saefong & Mark DeCambre