NEW YORK (Reuters) - Oil prices were up about 1% to the highest in more than three months on Thursday, boosted by hopes that the China-U.S. trade fight would soon come to an end and by a report showing lower U.S. crude inventories.
Brent crude futures LCOc1 settled at $67.92 a barrel, rising 72 cents, or 1.07%. U.S. West Texas Intermediate crude futures CLc1 settled at $61.68 a barrel, up 57 cents, or 0.93%Both benchmarks were their strongest since Sept. 17.
China on Wednesday said it was in close touch with the United States on a trade deal signing ceremony, after U.S. President Donald Trump said a day earlier that he and Chinese President Xi Jinping will hold a ceremony to sign the Phase 1 trade deal.
The prospect of a sealed agreement propelled Wall Street to fresh highs, helping to support crude futures, which often follow equities. [.N]
The roughly 17-month trade war between the world’s two largest economies has hit global growth and demand for oil.
Even so, Brent has rallied 25 percent in 2019, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies including Russia.
Also supporting prices, the American Petroleum Institute, an oil industry group, said late on Tuesday that U.S. crude stocks fell by 7.9 million barrels last week, much more than forecast by analysts. [API/S]
“The stock market being strong coupled with the big drawdown that we had from the API is giving us the momentum that we have right now,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
“And with the OPEC production cuts, you’re running out of reasons to be short,” Flynn said.
Trading volume remained low due to the Christmas holiday, which has delayed the release of the U.S. government’s official oil inventory report by two days until Friday. [EIA/S]
The so-called OPEC+ group agreed this month to extend and deepen production cuts that would take as much as 2.1 million barrels per day (bpd) of supply off the market from Jan. 1, or roughly 2% of global demand.
Still, U.S. producers, not party to the OPEC+ agreement, have been pumping record amounts of oil, especially shale. Growth in U.S. production is forecast by many to slow in 2020.
“Oil prices continue to show year-end strength, supported by a combination of definitive progress on the U.S.-China trade deal, the December OPEC/OPEC+ agreement and slowing shale activity,” said Stephen Innes, chief Asia market strategist at AxiTrader.
But more supply is coming in the new year from OPEC members Saudi Arabia and Kuwait, which this week agreed to end a dispute over their Neutral Zone, which can supply as much as 500,000 bpd.
Additional reporting by Alex Lawler and Aaron Sheldrick; Editing Kirsten Donovan, Steve Orlofsky and Cynthia Osterman