Published: Wed, January 09, 2019
Economy | By

Oil prices edge up on trade talk hopes and OPEC cuts

Oil prices edge up on trade talk hopes and OPEC cuts

Traders are saying the markets are being underpinned today on hopes the current talks between US and Chinese officials in Beijing will bring an earlier-than-expected end to the ongoing trade dispute between the two economic powerhouses.

Brent crude LCOc1 futures rose $1.47 to $58.53 a barrel, a 2.6 percent gain, as of 11:12 a.m. EST (1612 GMT).

What will be the average price for Brent Crude Oil in 2019?

Futures in NY increased as much as 1.6% following six days of gains, the longest streak of increases since July 2017.

U.S. Commerce Secretary Wilbur Ross said on Monday that there was a "very good chance" of reaching a settlement, while China's Foreign Ministry said Beijing had the "good faith" to resolve trade friction with the United States.

Prices drew support from an agreed supply cut by the Organization of the Petroleum Exporting Countries, as well as some non-member countries such as Russian Federation and Oman.

U.S. West Texas Intermediate (WTI) crude oil futures climbed 59 cents, 1.22 percent, to $49.11 per barrel.

Oil closed at a three-week high as USA negotiators touted progress in trade talks with China and investors gained faith that OPEC will shrink output.

Specifically, net-long positions in Brent (the difference between bets on a price increase and wagers on a drop) fell by 6.1 percent in the week ended January 1, according to data from ICE Futures Europe exchange.

The crude prices have declined by 40% after declaring the 4 year high, which was over $76 per barrel. The contract closed 0.5% higher at $57.33 on Monday. The global benchmark crude traded at an $8.61/bbl premium to WTI for the same month.

A separate government report scheduled for release on Wednesday is expected to show American crude stockpiles declined by 2.7 MMbbl last week, according to the median estimate in a survey of analysts by Bloomberg. While six months may be enough to reduce the combined output of OPEC and its partners by the agreed 1.2mn bpd, if United States production continues to grow at the current rate, it would likely offset this cut completely.

"There a confluence of factors helping-a big driver is progress in trade talks and hopes that global growth will be supported", said Stephen Innes, head of trading for Asia Pacific at Oanda Corp.

A steep rise in onshore shale drilling has helped make the United States the world's top producer, with crude production (C-OUT-T-EIA) up 2 million barrels per day (bpd) previous year to a world record 11.7 million bpd. Nationwide inventories are near their lowest level in nearly two months.

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