Brent oil extended its longest rally in a year and a half, rebounding above $60 a barrel, on hopes of a resolution in the U.S.-China trade dispute.
Futures in London -- which last traded over $60 in December -- are up for an eighth session, recovering from a 35 percent collapse in the last quarter of 2018.
The world’s two biggest economies wrapped up three days of trade talks in Beijing and are reportedly coordinating how to characterize the results publicly.
Meanwhile, an industry report Tuesday was said to show American crude inventories declined.
Fears of a slowdown in oil demand are receding with an easing of the long-running trade tensions, which helped drag crude prices into a bear market after they hit a four-year high in October. Confidence is also strengthening that the Organization of Petroleum Exporting Countries and its allies including Russia will curb output enough to counter booming U.S. supplies and avoid an oversupply.
“There is positive momentum in the oil market in the new year as economic optimism seeps back in,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. “If this state of affairs persists, OPEC and non-OPEC supply cuts that go into effect this month will prove more effectual in attenuating predicted implied global stock builds in 2019.”
Brent for March settlement rose as much as $1.63, or 2.8 percent, to $60.35 a barrel and traded at $60.25 on the ICE Futures Europe Exchange in London as of 1:56 p.m. local time. The global benchmark crude was at a premium of $8.71 a barrel to West Texas Intermediate for the same month.
WTI for February delivery climbed $1.42 to $51.20 on the New York Mercantile Exchange, the first time it’s back above $50 since Dec. 17.
U.S.-China trade negotiations have concluded after being extended by a day, showing both the sides are serious, according to a Chinese foreign ministry spokesman. The talks were originally scheduled for two days.
President Donald Trump is said to be eager to strike a deal soon to perk up financial markets that have slumped on concerns over a trade war between the nations. He earlier expressed optimism in a tweet, exclaiming “Talks with China are going very well!”
“There is further upside to come in prices, as we see more evidence coming through that members of OPEC+ are complying with their new production cut,” said Warren Patterson, senior commodities strategist at ING Bank NV. “We see the market largely balanced over the first half of 2019.”
Meanwhile, the American Petroleum Institute was said to show crude stockpiles fell 6.13 million barrels last week. Still, the data also signaled substantial increases in American gasoline and diesel inventories, a bearish signal for demand. A government report on Wednesday is forecast to show crude inventories dropped 2.7 million barrels, though the hoard at the nation’s key storage hub may have increased.
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