Oil prices surged in Asia as U.S. President reportedly agreed to an initial deal with China to offset the trade war.
U.S. Crude Oil WTI Futures increased 0.5% to $59.48, while International Brent Oil Futures increased 0.6% to $64.61.
Washington agreed not to set additional tariffs on Chinese products and might decrease existing duties, according to newswires.
In return, Beijing will surge its buying of U.S. farm goods. The agreement could be officially announced later in the day, according to BBC News. They noted that many of the more difficult issues still need to be addressed.
The Council on Foreign Relations noted that it should not be described as a trade agreement. It is a buy-and-sell deal that does virtually nothing to discuss substantive concerns of the U.S. with China’s trade practices. Also, U.S. farmers and consumers paid a high price.
However, concerns on oil demand remain despite the news. ANZ Bank said lingering doubts about demand would cap the upside on prices.
Oil prices decreased earlier in the day after the IEA said global oil inventories could increase sharply through March despite a deal by OPEC+ to deepen output cuts. Also, there is a deal on lowering expectations of production by the U.S. and other non-OPEC countries.
Elsewhere, Norway’s oil production in November hit a 32-month peak at 1.71 million bpd, the NPD said.
AxiTrader market strategist said while the current trade deal will likely limit demand devastation, it might not be enough to counter a glutted market in 2020. Thus, it may be the reason they are not expecting a massive jump in oil prices now.
Oil Prices on its Peak as U.S.-China Deal Continues
Oil prices extended increase, scaling three-month peaks as the U.S. and China moved closer to a resolution. The war raised significant questions about global demand for crude.
Brent futures jumped 43 cents, or 0.7%, to $64.63 a barrel, its highest since Sept. 23.
West Texas Intermediate crude increased 31 cents, or 0.5%, to $59.49 a barrel, the highest since Sept. 16.
A senior market analyst at OANDA said risk appetite ran wild after Trump signaled, he agreed with China. Also, it is the only positive for global demand news for crude.
A decline in the U.S. dollar against the backdrop of a strong pound also helped to increase commodity prices.
Asian markets climbed to multi-month highs on Friday after Wall Street increased to record highs, mirroring shareholder optimism.
If the United States and China trade war improves, global GDP will increase by half a percentage point in 2020, and that would wonder for crude demand news.
While a trade agreement would end the uncertainty that could give a shot in the arm for oil demand in the near term, concern continues to drift about the demand profile amid ample supplies.
In the meantime, the White House agreed to suspend some tariffs on Chinese products and reduce others in return for Beijing’s pledge to increase purchases of U.S. farm goods in 2020.
White House did not release any statement, increasing questions about whether both sides agreed on the terms.
Further ahead, an IEA report on Thursday pointed to future pressure on oil prices, expecting a sharp increase in global inventories.
That contrasts with OPEC’s research, which reports a small loss in the market next year due to Saudi Arabia’s supply limit even before the latest cut deal takes effect.