NEW YORK (Reuters) - Oil prices rose more than 1% on Tuesday, supported by hopes the U.S.-China trade deal will bolster oil demand in 2020 after a prolonged dispute between the world’s two largest economies dented global market sentiment.
The Phase 1 agreement between the United States and China has been “absolutely completed,” Larry Kudlow, a top White House adviser, said on Monday, predicting U.S. exports to China will double under the deal.
Brent crude LCOc1 futures gained 76 cents, or 1.2%, to settle at $66.10 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 73 cents, or 1.2%, to settle at $60.94 a barrel.
The Phase 1 agreement does not mean tensions are going to fully dissipate anytime soon, Dallas Fed President Robert Kaplan said on Tuesday.
“Phase 1 is better than not having a Phase 1 but it doesn’t mean there won’t still be trade uncertainty,” Kaplan said in an interview with Bloomberg TV. “I think the trade issues with China are going to go on for...years.”
The prolonged trade dispute has dampened oil demand and weighed on prices. Banks including JP Morgan and Goldman Sachs have revised up their 2020 price forecasts in the wake of the improving trade outlook and a new OPEC-led agreement to curb output.
The Organization of the Petroleum of Exporting Countries and allies such as Russia - a group known as OPEC+ - will make a further oil supply cut of 500,000 barrels per day from Jan. 1 to support the market.
This comes on top of the existing deal to trim supply by 1.2 million bpd that came into effect on Jan. 1 this year.
“The combination of the increased risk appetite and larger-than-expected OPEC+ production cuts could keep speculative capital flowing into the long side for a few more sessions in limiting downside price swings,” Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note.
U.S. crude inventories rose by 4.7 million barrels in the week to Dec. 13 to 452 million, data from industry group the American Petroleum Institute showed late on Tuesday. Analysts polled by Reuters had expected a draw of 1.3 million barrels. Prices pared gains slightly in post-settlement trade after the data was released.
Official government data on stockpiles is due on Wednesday.
Additional reporting by Alex Lawler in London and Jessica Jaganathan in Singapore; editing by Louise Heavens, David Evans and David Gregorio