Oil prices hold near three-month highs

Oil prices hold near three-month highs
Wind turbines operate at sunrise in the Permian Basin oil and natural gas production area in Big Spring, Texas, US. (Reuters/File)
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Updated 16 December 2019

Oil prices hold near three-month highs

Oil prices hold near three-month highs
  • The rise is supported by the report of initial deal between the US and China

LONDON: Oil prices on Monday held near three-month highs, supported by last week’s announcement that an initial trade deal had been reached between the US and China.

Brent crude oil futures rose 10 cents or 0.15 percent to $65.32 a barrel, while West Texas Intermediate crude was down 4 cents or 0.07 percent to $60.03 a barrel.

The US and China announced on Friday a “phase one” agreement that will reduce some US tariffs in exchange for what US officials said would be a big jump in Chinese purchases of US farm products and other goods.

“What the market needs now, though, is clarity around exactly what the deal entails,” analysts from ING Economics said. “The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is.”

The Friday agreement averted additional tariffs on Chinese goods totaling $160 billion that the US was set to impose over the weekend.

US Trade Representative Robert Lighthizer said on Sunday the deal would nearly double US exports to China over the next two years and was “totally done” despite the need for translation and revisions to its text.

China’s State Council’s customs tariff commission said on Sunday it had suspended additional tariffs on some US goods that were meant to be implemented on Dec. 15.

Data from China on Monday showing industrial output and retail sales growth accelerating more than expected in November offered some support for oil prices. Investors remained cautious as growth in China was expected to slow further next year, with the government likely to set its growth target at about 6 percent in 2020 compared with 6-6.5 percent this year.

“It seems the market has now fully priced (in) the phase one trade agreement, so we are going to need further news if we are going to push through the important (technical) resistance that is just ahead,” said Michael McCarthy, chief market strategist at CMC Markets. Brent has rallied this year, supported by production curbs by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia who this month agreed to lower supply by a further 500,000 barrels per day as of Jan. 1.

The decision, according to Saxo Bank commodity strategist Ole Hansen, “helped trigger a 25 percent increase in the combined crude long to 602,000 lots, the highest since May and the biggest one-week accumulation since December 2016.”