London — Oil prices rose 1% on Friday, on track for solid weekly gains after financial markets strengthened due to hopes the US and China may soon resolve their trade dispute.
Tightened supply following oil cartel Opec-led cuts in crude output also aided gains, but fears of an economic slowdown have kept markets in check.
International Brent crude futures were at $62.30 a barrel at 9.45am GMT, up 62c, or 1%. US West Texas Intermediate (WTI) crude futures gained 59c or 1.1% at $53.18 a barrel. WTI and Brent are set for their second week of gains, rising nearly 11% and 9%, respectively.
Markets were supported by hopes that an all-out trade war between Washington and Beijing might be averted. Three days of talks concluded this week with no concrete announcements, but officials said further negotiations would likely follow this month.
“Sentiment is greatly improved, and trade talk optimism has helped boost risk appetite,” Jasper Lawler, head of research at London Capital Group, said in a note.
Concerns about the global economy linger, however, with signs mounting that China’s growth in 2018 and 2019 would be the lowest since 1990. Most analysts have downgraded their global economic growth forecasts below 3% for 2019, with some fearing a recession amid trade disputes and spiraling debt.
On the supply side, oil markets are receiving support from supply cuts led by oil cartel Opec aimed at reining in a glut that emerged in the second half of 2018.
Lower oil exports from Iran since November, when US sanctions against it resumed, have also supported crude.
Playing a key part in the emerging glut was the US, where crude oil production soared by more than 2-million barrels per day (bpd) in 2018 to a record 11.7-million bpd. Consultancy JBC Energy this week said it was likely that US crude production was “significantly above 12-million bpd” by this month.
Abhishek Kumar, senior energy analyst at Interfax Energy in London, said higher oil prices so far this year “could well define a near-term trend despite uncertainties surrounding the US-China trade talks. The implementation of the Opec+ deal, together with potential for further falls in Iranian supplies, will also be bullish for prices.”