Oil near $59 as trade deal hopes jostle with ample supply

Oil was near $59 a barrel in New York after rising the most in almost two weeks as the US and China signed a trade agreement, though remains capped by signs that supplies remain plentiful.

Futures gained 0.5%, having increased 1.2% on Thursday as Washington and Beijing’s phase-one deal commits China to $52.4 billion in additional purchases of American energy over 2020 and 2021. Still, there was some skepticism about whether such as target is feasible, particularly if it leaves retaliatory tariffs on American oil and liquefied gas in place.

“The signing of the US-China trade deal has given optimism for a revival in global manufacturing, and thus stronger oil demand growth, and this is what gives the oil price some vigor,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.

Nonetheless, West Texas Intermediate futures have lost 0.4% this week, heading for the first back-to-back weekly drop since October. The February contract added 27 cents to $58.79 a barrel on the New York Mercantile Exchange as of 10:57 a.m. London time.

Brent for March settlement rose 38 cents to $65 on the ICE Futures Europe exchange in London after climbing 1% on Thursday. That put the premium over WTI for the same month at $6.17 a barrel.

The International Energy Agency noted on Thursday that global markets have a “solid base” of inventories and climbing supplies from outside the OPEC cartel, even as elevated tensions in the Middle East endanger production from Iraq and elsewhere. A big jump in American oil-product stockpiles last week underscored that the shale boom continues.

© 2020 Bloomberg