January 9, 2019 / 12:41 AM / 5 months ago

Oil jumps on U.S.-China trade talk hopes, OPEC cuts

NEW YORK (Reuters) - Oil prices jumped about 5 percent on Wednesday to their highest levels in nearly a month as U.S.-China trade talks raised hopes of easing tensions between the world’s two largest economies, while OPEC-led crude output cuts also provided support.

An employee takes a sample of oil at the Filanovskogo platform operated by Lukoil company in Caspian Sea, Russia October 16, 2018. REUTERS/Maxim Shemetov/Files

West Texas Intermediate (WTI) crude CLc1 futures rose $2.58 to settle at $52.36 a barrel, a 5.18 percent gain, the first time this year that WTI has topped $50.

Brent crude LCOc1 futures gained $2.72, or 4.63 percent, to settle at $61.44 a barrel.

The sharp gains extended a rally that has pushed futures up about 14 percent in 2019.

U.S.-China trade talks, which were carried over into an unscheduled third day, ended on Wednesday with negotiators focused on Beijing’s pledge to buy “a substantial amount” of agricultural, energy and manufactured goods and services from the United States, the U.S. Trade Representative’s office said.

“Thus far, the talks are still inspiring optimism that could preclude any sharp near-term down swings in the equities that could allow oil to maintain a recently established accumulation phase,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Oil prices also have received support from supply cuts by the Organization of the Petroleum Exporting Countries and allies including Russia.

The OPEC-led cuts, which officially began in January, are aimed at reining in an emerging glut as U.S. crude output C-OUT-T-EIA has surged to a record 11.7 million bpd.

Saudi Arabia’s energy minister said he was confident that action to rein in output would bring the oil market into balance, adding that he would not rule out calling for further action.

Khalid al-Falih also said the kingdom would export 7.1 million barrels per day (bpd) in February, down from 7.2 million bpd in January.

Data from the U.S. Energy Information Administration (EIA) showed domestic crude stockpiles fell less than expected last week. Gasoline and distillate inventories rose more than anticipated.

Crude inventories USOILC=ECI fell by 1.7 million barrels, smaller than the 2.8 million-barrel draw analysts had expected.

Gasoline inventories USOILG=ECI rose by 8.1 million barrels, far exceeding analysts’ expectations in a Reuters poll for a gain of 3.4 million barrels. Distillate stockpiles USOILD=ECI rose by 10.6 million barrels, more than five times the expected increase of 1.9 million barrels, the EIA data showed.

“All in all the report is bearish,” Commerzbank commodities analyst Carsten Fritsch said.

Morgan Stanley cut its 2019 oil price forecasts by more than 10 percent. The bank said in a note it now expected Brent to average $61 a barrel this year and WTI to average around $54 per barrel.

Reporting by Stephanie Kelly in New York, Noah Browning in London and Henning Gloystein in Singapore; Editing by Richard Chang and Paul Simao

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