Crude climbs on hopes for US-China trade deal

Dollar slips on mixed data

NEW YORK, Nov 2, (RTRS): Oil prices rose 2% on Friday on signs of progress in US-China trade talks and stronger-than-expected economic data in both countries, including US employment and Chinese manufacturing activity numbers.

Brent crude was up $1.10, or 2%, at $60.72 a barrel by 11:33 a.m. ET (1533 GMT), but remained on course for a drop of about 2% for the week.

West Texas Intermediate crude rose $1.06, or 1.9%, to $55.24 a barrel, a weekly loss of more than 2.4%.

A Reuters survey showed that oil prices are expected to remain under pressure this year and next. The poll of 51 economists and analysts forecast Brent crude would average $64.16 a barrel in 2019 and $62.38 next year.

Another Reuters survey found output from OPEC members recovered in October from an eightyear low, with a rapid recovery in Saudi production from attacks on its oil infrastructure in September offsetting losses in Ecuador and voluntary curbs under an international supply pact.

Worries about global economic growth, and oil demand, were eased after US Commerce Secretary Wilbur Ross said on Friday the initial “phase one” trade pact with China is likely to be signed around mid-November.

A trade war between the world’s two biggest economies has weighed on prices, fanning fears that slowing economic growth could dent demand for oil.

Groth

“The market has been driven lower this week on fears of slowing demand growth because of uncertainty regarding U.S.-China trade relations and a sizeable expected build in crude stocks,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

“I think today’s action is a reversal of that, and you’re probably also seeing some weekend covering.”

Prices were also supported by expansion in China’s factory activity at the fastest pace since 2017, raising optimism over the health of the world’s secondlargest economy. US jobs growth also slowed less than expected in October.

“With the positive jobs report and the Fed recently lowering interest rates, I think it definitely eases some concerns around U.S. economic growth,” McGillian said. “Worries about economic growth are largely in Europe and Asia.”

US crude inventories rose by 5.7 illion barrels in the week to Oct. 25, dwarfing expectations for an increase of just 494,000 barrels.

US crude production soared nearly 600,000 barrels per day in

August to a record 12.4 million, buoyed by a 30% increase in Gulf of Mexico output, government data released on Thursday showed.

Meanwhile, the dollar dropped on Friday after data showed a mixed view on the economy, and as optimism that the United States and China will reach a deal to end their trade war reduced safehaven demand for the greenback. The dollar initially gained after US jobs growth slowed less than expected in October, while wages gained and hiring in the prior two months was stronger than previously estimated.

Weaker

“The data is much better than expected. Markets were braced,certainly in headline terms, for some much weaker numbers given the expected impact from the GM strike and the census hiring. Sovery good data in that context,” said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto. Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed.

The strike by about 46,000 workers at GM plants in Michigan and Kentucky ended last Friday. Temporary census workers also left their jobs during the month.

The US currency was unable to hold onto the gains, however, and was further dented after the Institute for Supply Management (ISM) said the manufacturing sector contracted for the third consecutive month in October. The dollar index against a basket of six major currencies fell to 97.24, down 0.12% on the day. It earlier rose to 97.45 on the jobs data. The dollar has weakened since the Federal Reserve on Wednesday cut interest rates for the third time this year, and indicated that further reductions may not be forthcoming. Concerns about a slowing American economy is weighing on the greenback, however, with the US central bank expected to resume rate cuts if the economic data worsens. “There is a bit more vulnerability starting to feed into the dollar, with perhaps the US economy slowing down,” Osborne said.

Fed Vice Chair Richard Clarida said on Friday that the rate cuts put into effect leave the US economy better armed to withstand the risks of a global slowdown. Safe-haven flows into the US currency have also weakened on optimism that the United States and China are close to reaching a deal to end their trade war, which has been blamed for slowing global growth. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin made progress on a variety of issues during a telephone call on Friday with China’s Vice Premier LiuHe about an interim trade agreement, USTR said in a statement on Friday.