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Thursday 17

January, 2019 4:05 PM



Oil prices rise over 2% on trade optimism

Oil prices rise over 2% on trade optimism

Oil prices are higher on hopes that crude demand may surge if talks between US and China resolve the countries' trade dispute.

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By AAP 09.01.2019 07:34 AM

Oil prices have risen by more than two per cent, supported by hopes that crude demand may rise more quickly if talks between US and Chinese officials resolve the trade dispute between the world's two biggest economies.

US West Texas Intermediate crude oil futures settled up $US1.26, or 2.6 per cent, at $US49.78 a barrel overnight.

During the session, the contract touched $US49.95, the highest since December 17.

Brent crude futures rose $US1.39 a barrel, or 2.4 per cent, to $US58.72.

"The trade situation is definitely bullish; you have a good demand construction if we can wrap up this trade deal," said Bob Yawger, director of futures at Mizuho in New York.

The talks are going well so far and will continue on Wednesday, US delegation member Steven Winberg said.

These are the first face-to-face meetings between officials from the two countries since US President Donald Trump and Chinese President Xi Jinping agreed in December to a 90-day truce in a trade war that has buffeted global financial markets.

On Monday, US Commerce Secretary Wilbur Ross and China's foreign ministry expressed optimism on resolving the dispute.

Some analysts warned, however, that tensions could flare anew.

Oil traders also worried that a possible worldwide economic slowdown could dent fuel consumption.

The hedge fund industry has cut significantly its bullish positions in crude futures.

S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $US10 per barrel to $US55 for Brent and $US50 per barrel for WTI.

"Our lower oil price assumptions reflect slowing demand and rising supply globally," said S&P Global Ratings analyst Danny Huang.

Crude prices have been buoyed by supply cuts from the Organisation of the Petroleum Exporting Countries including top exporter Saudi Arabia, and allies including Russia.

Saudi-based Arab Petroleum Investments Corp, which funds petroleum projects, estimated that oil prices are likely to trade at $US60 to $US70 per barrel by mid-2019.

Still, US oil supply is surging.

A steep rise in onshore shale drilling has helped make the United States the world's top producer, with crude production up two million barrels per day last year to a world record 11.7 million bpd.

The market is closely watching US supplies, which analysts expect pulled back 3.3 million barrels in the latest week.

If government data on Wednesday confirms that forecast, it would send a strong bullish signal to the market, said John Kilduff, a partner at Again Capital Management in New York.

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