Oil prices climbed over 2 per cent on Thursday as investors grew more confident the US and China will resolve the months-long trade dispute that has hampered the global economy. Baytex photo.
Oil prices up over 2 per cent
Oil prices climbed over 2 per cent on Tuesday on hopes that crude demand will be on the upswing should trade talks between the US and China resolve the ongoing trade dispute between the world’s two largest economies.
By 2:34 p.m., EST, Benchmark Brent crude futures were up $1.33 to $58.66 and US West Texas Intermediate futures rose $1.16 to $49.68/barrel. Earlier in the session, WTI futures hit $49.95, the highest since Dec. 17.
“The trade situation is definitely bullish; you have a good demand construction if we can wrap up this trade deal,” Bob Yawger, director of futures at Mizuho told Reuters.
US delegation member Steven Winberg told Reuters that the trade talks are going well so far and will continue on Wednesday. This is the first face-to-face meeting between officials since US President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce in the trade war in December.
On Monday, US Commerce Secretary Wilbur Ross and China’s foreign ministry were both optimistic the dispute would be resolved. However, some analysts remain concerned that trade tensions could flare up again.
The trade war has left oil traders concerned about a global economic slowdown which would likely cut fuel consumption and the hedge fund industry has cut its bullish positions in crude futures.
S&P Global Ratings has lowered its average oil price forecasts for 2019 to $55/barrel for Brent and $50/barrel for WTI.
“Our lower oil price assumptions reflect slowing demand and rising supply globally, S&P Global Ratings analyst Danny Huang told Reuters.
Beginning this month, OPEC and its allies began another round of supply cuts in an effort to boost oil prices. The cartel along with Russia and other participants have agreed to curtail total production by 1.2 million barrels per day (b/d).
The Wall Street Journal reports that Saudi Arabia will cut exports by more than promised in hopes of engineering an $80/barrel oil price. According the the WSJ, the Saudis will cut their crude exports by 800,000 b/d below November levels.
However, US shale production continues to climb. In 2018, US oil production rose by 2 million barrels per day to a record high 11.7 million b/d.
On Wednesday, the US Energy Information Administration will release its crude inventory data. Analysts polled prior to the release say they expect US crude stocks to be down by 3.3 million barrels. Should this bear out, John Kilduff, partner at Again Capital Management told Reuters that it would send a bullish signal to the market.