Oil futures climbed on Thursday after China and the U.S. agreed to lift existing tariffs if a partial trade deal is struck soon, signaling that trade talks are progressing and providing an upbeat backdrop for crude demand.
“The news that tariffs are to be rolled back under a Phase One trade deal” have given oil a boost Thursday, despite U.S. government data Wednesday that revealed a hefty weekly climb in domestic crude supplies, said Marshall Steeves, energy markets analyst at IHS Markit.
“For now, December WTI is trading within [Wednesday’s] range, so we haven’t yet seen a break higher,” said Steeves. “I think that overall we are in a sideways-to-slight uptrend so my outlook is mostly sideways to slight gains, with resistance closer to $60.”
January Brent crude BRNF20, +1.25% picked up 35 cents, or 0.6%, to trade at $62.09 a barrel on ICE Futures Europe, following a its 1.9% skid a day earlier.
On Thursday, Gao Feng, a ministry spokesperson for China’s Commerce Ministry, said Beijing and Washington agreed to the simultaneous removal of import duties recently imposed as the parties move closer to a so-called phase one trade pact. The report helped to bolster sentiment for assets considered risky, including stocks, particularly after reports on Wednesday signaled that a meeting between President Donald Trump and Chinese President Xi Jinping would be delayed until next month.
Trade clashes between the Beijing and Washington have been a focus for energy traders because the long-running dispute between the two global superpowers threatens to hurt appetite for crude and its byproducts by hurting economic growth. The dispute centered on import duties and intellectual-property rights has contributed to slowing global economic growth.
Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note said “its all about positive trade developments coming to fruition lifting a major negative threat to the economy.”
Crude-oil investors also have been focused on signs of growing U.S. oil inventories which has weighed on prices.
The Energy Information Administration on Wednesday reported that U.S. crude supplies rose a second straight week, up 7.9 million barrels for the week ended Nov. 1.
December natural gas NGZ19, +0.67% traded at $2.857 per million British thermal units, up 2.9 cents, or 1%.
Prices turned higher after the EIA reported Thursday that domestic supplies of natural gas rose by 34 billion cubic feet for the week ended Nov. 1. That was smaller than the build of 39 billion cubic feet expected, on average, by analysts polled by S&P Global Platts.