By Barani Krishnan
Investing.com – After U.S. jawboning, it’s the turn of the Chinese to build hope that a trade deal between the world’s biggest economic powers will materialize, regardless the odds.
News of heightened OPEC cuts in February to prevent oil prices from slipping under key support levels also helped U.S. West Texas Intermediate crude and London’s Brent, the global benchmark for oil, recover some of the losses from the previous session.
was up 48 cents, or 0.9%, at $55.81 per barrel by 12:10 PM ET (17:10 GMT), off session highs at $57. On Friday, WTI settled down 2.6%, retreating after February’s strong run that, combined with January, gave U.S. crude a gross gain of 25%, one of its best starts ever for a year.
rose by 34 cents, or 0.5%, to $65.41 per barrel. It is up 21% year to date.
Monday’s rebound came after a Bloomberg report quoting a spokesman for China’s National People’s Congress as saying substantial progress has been made in trade negotiations with Washington over the past week.
People familiar with the discussions said a trade deal was likely so long as Beijing stuck to pledges ranging from protection of intellectual property to purchase of U.S. products, according to the report, which came days after U.S. Trade Representative Robert Lighthizer admitted the Trump administration was having problems reaching closure in its tariff war with Beijing.
Bloomberg also reported that OPEC’s production slumped last month as key members Saudi Arabia, Kuwait and the United Arab Emirates delivered all — and in some cases more — of the cuts they had pledged under a deal between the group and its partners. Non-member Russia pumped the equivalent of 11.336 million barrels a day, down 82,000 bpd from the October baseline, Bloomberg calculations showed.
Reuters, meanwhile, reported that OPEC might let go of an opportunity to deepen production cuts at its April meeting to keep powder dry for its June get-together, where it is widely expected to get a fresh mandate to extend the 1.2 million bpd reduction agreed to in December.
But some think that deeper OPEC cuts might work contrary to oil bulls’ hopes of keeping prices up by damaging demand in Asia, the world’s growth zone now for energy.
Headwinds to Asian economies and rising tensions between India and Pakistan sit squarely within the Saudi push for deeper production cuts, said John Kilduff, founding partner at New York energy hedge fund Again Capital.
“The real critical center for crude oil is Asia and Asian demand and the economic data out of Asia has been quite poor,” Kilduff told CNBC last week. “And I’m not certain that even striking a trade deal with China is going to improve that country’s fortunes.”
Scott Shelton, energy futures broker at ICAP (LON:) in Durham, N.C. agreed.
“Talk is the Chinese are done buying and the U.S. crude exports are continuing to weaken prices,” Shelton said.
U.S. crude production is already at a world record of 12 million bpd and growing, while its exports are at all-time peaks of 3 million bpd, offsetting some of the support to prices from the OPEC cuts.
Source: Investing.com
