The near signing of an agreement between world`s largest economies and the Organisation of Petroleum Exporting Countries (OPEC) cuts has meant a potential break through.
Oil prices rose pushed by a potential breakthrough in the trade war between the world`s largest economies and OPEC-led efforts to constrain supply, although trading was quiet as many markets were in holiday mode.
The rent crude LCOc1 was up 16 cents, or 0.2%, at $67.36 a barrel by 0155 GMT. Stephen Innes chief Asia market strategist at AxiTrader, confirmed to Reuters that “oil prices continue to show year-end strength supported by a combination of definitive progress on the U.S.-China trade deal, the Dec OPEC/OPEC+ agreement, and slowing shale activity. All of which is pointing to a stronger performance for oil prices in Q1 than anyone had thought only two months ago.”
U.S. President Donald Trump informed that he and Chinese President Xi Jinping will have a signing ceremony for the so-called Phase 1 agreement to end the roughly 17-month trade war that had hit global economic growth and demand for oil, leaving prices range-bound for the most of the year.
Lower demand also rendered supply cuts by the Organisation of Petroleum Exporting Countries (OPEC) and allies including Russia less effective in supporting the market. Therefore the so-called OPEC+ grouping agreed in November to extend and deepen production cuts that would take as much as 2.1 million barrels per day (bpd) of supply off the market, or roughly 2% of global demand.
U.S. producers (not a party to the OPEC+ agreement) have been pumping record amounts of oil, especially shale crude, to fill any supply gaps. Growth in production in the U.S. is forecast by many to slow, however.
Still, Reuters reports that more supply is coming in the new year with Saudi Arabia and Kuwait earlier this week agreeing to end a dispute over their Neutral Zone, which can supply as much as 500,000 barrels per day of oil, or about 0.5% of global demand.