Investing.com – OPEC’s plan for deeper oil cuts barely a month after the tight supply scare from the Saudi attacks sent crude prices higher on Thursday.
Also boosting oil late in the day was a New York Times report that the United States and China were close to a partial trade deal after more than a year of on-off talks and hundreds of billions of dollars of tit-for-tat tariffs.
Analysts had earlier been pessimistic about the latest round of talks in Washington, fearing another breakdown could drag the market lower again before the week concluded. “Oil traders are looking at the world through China colored glasses,” Phil Flynn of Chicago’s Price Futures Group said.
U.S. West Texas Intermediate crude settled up 96 cents, or 1.8%, at $53.55 per barrel.
U.K. Brent oil settled up 78 cents, or 1.3%, at $59.10.
Oil prices jumped toward the close of the session after the New York Times reported that the United States and China could announce a limited trade deal this week, averting a further escalation in trade tensions.
Myron Brilliant, the executive vice president and head of international affairs at the Chamber of Commerce, told reporters on Thursday that he was “hopeful” that a limited arrangement stopping a planned tariff increase on Oct. 15 would emerge from this week’s meetings. A limited deal would include concessions that China has made to the United States, including an agreement on currency, the report said.
The White House could also contemplate removing the threat of additional tariffs that are slated to be imposed in December or scale back some of the tariffs it has already levied on more than $360 billion of Chinese goods, Brilliant said.
The agreement, however, is unlikely to address the key sticking points such as China’s economic practices and subsidies to its firms.
High-level negotiations between the White House and Beijing began with fanfare again on Thursday after being stalled for five months, lending to higher risk appetite on Wall Street and across markets. But many traders were also pessimistic about real gains from the talks given continuous diplomatic offensives fired by the Trump administration against China in recent days.
Earlier in the day, oil rose after OPEC upheld its forecast for global oil demand next year, while indicating it expects supply from non-OPEC sources to grow slightly less than previously thought.
OPEC "will take appropriate, strong, positive decisions that will set us on the path of heightened and sustained stability for 2020," the cartel's Secretary General Mohammad Barkindo told reporters at a briefing in London, Reuters reported.
"All options are open," Barkindo said, when asked about the prospect of a deeper oil supply cut.
OPEC, Russia and other producers, an alliance known as OPEC+, have since January implemented a deal to cut oil output by 1.2 million barrels per day to support the market. The pact runs to March 2020 and the producers meet to set policy on Dec. 5-6.
Should OPEC+ call for deeper cuts, it would be further proof that the only way to fetch higher oil prices these days would be to crimp supply instead of trying to spur demand.
It’s been a remarkable few weeks in oil after the Sept. 14 attack on Saudi energy infrastructure that briefly knocked out 5% of daily global supply and sent Brent beyond $70 per barrel before the market’s quick return to previous pricing on assurances that Riyadh’s production has been fully restored.
Separately, the Wall Street Journal reported that investment bankers could deliver as soon as Friday a valuation much lower than the $2 trillion expected by Saudi Crown Prince Mohammed bin Salman for the initial public offering of the kingdom’s state oil company Aramco.
Crude prices were also supported by reports that Russia and Saudi Arabia will sign more than $2 billion of deals and discuss the OPEC+ oil output agreement during President Vladimir Putin's first visit to the kingdom in more than a decade next week.