Oil Hits Two-Month High
(Bloomberg) -- Oil prices climbed to a two-month high as China was said to offer a trillion-dollar buying spree to defuse trade tensions with the world’s biggest economy.
Futures climbed 3.3 percent in New York to cap the third straight weekly increase. Bloomberg News reported China proposed a six-year shopping binge for American goods, diminishing concerns about a brake on economic growth. Meanwhile, U.S. factory output expanded by the most in 10 months and the International Energy Agency forecast another year of growth in oil demand.
Signs of progress on trade “have greased the wheels in commerce globally,” Bob Iaccino, chief market strategist at Chicago-based Path Trading Partners, said in an interview. “The perception of diminished demand which was turning up in the economic numbers is turning around, and that’s going to bring the speculators back.”
After ending 2018 in freefall, oil is off to its best start for a year since 2001, gaining 18 percent since the start of January as worries about a global oversupply fade. OPEC production fell by the most in almost two years in December after the cartel and other top exporters agreed to rein in output, according to data released this week. Still, prices remain down by about a third from early October highs.
West Texas Intermediate crude for February delivery rose $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange. The contract added 4.3 percent this week.
Brent for March settlement advanced 2.5 percent to $62.70 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at an $8.66 premium to WTI for March.
Crude demand is on course to grow this year, supported by lower prices, the Paris-based EIA said on Friday. Schlumberger Ltd. offered more reassuring news for those worried about a glut of U.S. crude. The world’s biggest oilfield service company said North American shale drillers were likely to slow activity in the coming year as their finances come under pressure.
Production from OPEC’s 14 members sank by 751,000 barrels a day last month, with just over half the reduction accounted for by Saudi Arabia, according to a report from the group’s secretariat. It’s the biggest cut since the organization kicked off a previous round of curbs in early 2017.
“OPEC’s releasing information on how much they’ve cut, and Saudi Arabia keeps talking about how much more they’re going to cut,” said Ellen Wald, president of Transversal Consulting, an energy and geopolitics consultancy in Jacksonville, Florida.
Prices are likely to keep climbing at least until April, she said, when the U.S. is due to decide whether to extend waivers against sanctions for buyers of Iranian oil.
Other oil-market news: Gasoline futures rose 1.6 percent to $1.4528 a gallon in New York. Oil explorers still reeling from the late-2018 price collapse shut down drilling rigs in the U.S. at the fastest pace in almost three years. Five U.S. refiners either significantly reduced or totally replaced purchases of Venezuelan crude last year, and more may follow suit as President Donald Trump mulls new sanctions.
With assistance from Tsuyoshi Inajima, Heesu Lee and Grant Smith. To contact the reporter on this story: Alex Nussbaum in New York at email@example.com. To contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org Joe Carroll, Mike Jeffers.
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