Business
Oil prices extended gains on Friday, scaling three-month highs as the United States and China moved closer to a resolution to the 18-month trade war between the world’s two biggest economies that has raised big questions about global demand for crude.
FILE PHOTO: Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. Picture taken August 21, 2019. REUTERS/Jessica Lutz
LONDON: Oil rose on Friday to its highest in nearly three months as progress in resolving the U.S.-China trade dispute and Britain’s general election result appeared to lift two clouds that have been dampening investor appetite for risk.
U.S. sources said on Thursday that Washington has set its terms for a trade deal with Beijing, offering to suspend some tariffs on goods and cut others in exchange for Chinese purchases of more American farm goods.
Brent crude, the global benchmark , climbed to US$64.95 a barrel, the highest since Sept. 23, and as of 1000 GMT was up 71 cents at US$64.91. U.S. West Texas Intermediate crude gained 52 cents to US$59.70.
The 18-month trade war has been a dampener for oil prices, while uncertainty around Brexit has also weighed. Britain’s ruling Conservative Party won a large majority in Thursday’s general election, giving it the power to take the country out of the European Union.
“An eventful past 24 hours has removed a layer of uncertainty for the global economy,” said Stephen Brennock of oil broker PVM.
“Yet it remains to be seen whether the return of the feel-good factor is enough to set oil prices on a definitive northerly trajectory.”
A drop in the U.S. dollar against the backdrop of a strong pound helped boost commodities. The pound surged more than 2per cent on Thursday supported by the election result.
“Risk appetite among financial investors is now likely to remain high thanks to the deal between the U.S. and China and the forthcoming end to the Brexit cliffhanger,” said Eugen Weinberg, an analyst at Commerzbank. “This will also benefit the oil price.”
Brent has rallied by almost 21 percent in 2019, supported by efforts by the Organization of the Petroleum Exporting Countries and allies including Russia to cut production.
The alliance, known as OPEC+, agreed last week to lower supply by a further 500,000 barrels per day as of Jan. 1. They have been limiting supply since 2017, helping to clear a glut that built up in 2014-2016.
OPEC’s own research indicates that the oil market in 2020 may see a small supply deficit, although the International Energy Agency sees global inventories rising despite the further step by OPEC+.
(Additional reporting by Roslan Khasawneh; editing by Mike Harrison)
