Easing US-China tension boosts oil

Seoul — Oil prices kicked off the new year higher on Thursday as warming trade relations between the US and China eased demand concerns, while the rising tension in the Middle East fuelled worry about supply.

Global benchmark Brent crude futures, were up 22c, or 0.3%, to $66.22 a barrel by 4.30am GMT. US West Texas Intermediate (WTI) crude was up 18c, or 0.3%, at $61.24 a barrel.

Oil markets were closed on Wednesday for New Year’s Day.

Both benchmarks ended higher in 2019, posting their biggest annual gains since 2016, buoyed at the end of the year by a thaw in the prolonged trade dispute between the US and China — the world’s two largest economies — and a deeper output cut pledged by Opec and its allies.

“Oil remains supported by the back-burner trade truce and the uptick in political unrest in Iraq,” said Stephen Innes, chief Asia market strategist at AxiTrader.

The US military carried out air strikes against Iran-backed Katib Hezbollah militia group over the weekend. Angry at the air strikes, protesters stormed the US embassy in Baghdad on Wednesday, though they withdrew after the US deployed extra troops.

In 2020, Brent is forecast to average $63.07 a barrel, up from December’s estimate of $62.50, while WTI is forecast to average $57.70 a barrel, up from December’s estimate of $57.30, as the Opec-led supply cuts and the expectation of a US-China trade deal boosted analysts’ views on the prospects for the year, a Reuters poll showed.

US President Donald Trump said on Tuesday the US-China phase 1 trade deal would be signed on January 15 at the White House.

January also marks the start of the deeper output cuts by Opec and its partners, including Russia. Opec and its allies have agreed to cut a further of 500,000 barrels a day from January 1, on top of their previous cut of 1.2-million barrels a day that started on January 1 a year ago.

A fall in US crude inventories last week also supported prices. US crude stocks fell 7.8-million barrels in the week ended December 27, compared with analysts’ expectations for a decrease of 3.2-million barrels, according to data from the American Petroleum Institute (API) released on Tuesday.

Official data from the Energy Information Administration (EIA) is due on Friday as the release has been delayed by two days by the New Year’s holiday.

“Traders will look towards Friday’s EIA report for forward guidance on oil prices,” said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

Reuters