Tighter supply lifts oil to 3-month high
Oil traded near a threemonth high in New York as OPEC’s output curbs tightened global supply while trade talks between the U.S. and China lifted financial markets.
Futures rose as much as 1.3 percent to the highest since Nov. 20, after advancing 5.4 percent last week. President Donald Trump said talks with China were “very productive” as his team returned from Beijing and readied for another round of discussions in Washington this week, raising hopes that a trade war between the world’s largest economies will ease.
Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have made a strong start to their production cuts while Russia is accelerating its curbs, pushing crude 24 percent higher this year. Supply is also being threatened because of American sanctions against Venezuela and Iran. Reports that the U.S. and China had reached consensus in principle on the main topics in their trade negotiations helped boost investors’ risk appetite.
“Saudi Arabia seems willing to do whatever is necessary to reach levels of $80 a barrel, and judging by the price reaction, they’re on track,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Even rather bearish factors, like a stronger-than-expected rise in U.S. oil production, does not seem to derail the price recovery.”
West Texas Intermediate for March delivery rose as much as 74 cents to $56.33 a barrel on the New York Mercantile Exchange and traded 35 cents higher at 9:20 a.m. local time. Transactions will be booked Tuesday for settlement because of the U.S. Presidents Day holiday. Prices last week posted their biggest gain in more than a month.
Brent for April settlement was at $66.31 a barrel, up 6 cents, on the Londonbased ICE Futures Europe exchange, after gaining 6.7 percent last week. The global benchmark crude’s premium over WTI for the same month narrowed to $9.87, after widening to the biggest spread in more than three months on Friday.
Conciliatory signals from the world’s two biggest economies are calming fears Washington will ratchet up tariffs on Chinese goods before a March 1 deadline. “Big progress being made on soooo many different fronts!,” Trump said Sunday on Twitter.
Worries about the trade war worsening a global slowdown are receding, giving investors confidence that oil demand won’t be affected. Saudi Arabia is also pledging to cut its crude output beyond the level agreed with OPEC+ as it aims to drain any oversupply from the market.