Oil prices rise ahead of trade deal, likely stock draw

U.S.-China trade deal to be signed Wednesday at White House

  
Image used for illustrative purpose. Oil rigs extract petroleum as the price of crude oil rises to nearly $120 per barrel, prompting oil companies to reopen numerous wells across the nation that were considered tapped out and unprofitable decades ago when oil sold for one-fifth the price or less, on April 25, 2008 in the Los Angeles area community of Culver City, California.

Image used for illustrative purpose. Oil rigs extract petroleum as the price of crude oil rises to nearly $120 per barrel, prompting oil companies to reopen numerous wells across the nation that were considered tapped out and unprofitable decades ago when oil sold for one-fifth the price or less, on April 25, 2008 in the Los Angeles area community of Culver City, California.

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SINGAPORE: Oil prices edged higher on Tuesday as investors focused on the signing of a preliminary trade deal between the United States and China, the world's top oil consumers, and on expectations of a drawdown in U.S. crude oil inventories.

However, price gains were capped by receding Middle East tensions, with both Tehran and Washington desisting from any further escalation after this month's clashes.

Brent crude LCOc1 was up 16 cents, or 0.3%, at $64.36 per barrel by 0301 GMT after falling 1% on Monday. U.S. West Texas Intermediate crude futures CLc1 were up 13 cents, or 0.2%, at $58.21 a barrel.

"Oil prices are modestly rebounding, following four days of intense selling," said Edward Moya, analyst at brokerage OANDA, pointing to trade-deal optimism and fading concerns over the U.S.-Iran conflict.

"Oil prices are tentatively rebounding after seller exhaustion kicked in as investors await the next developments on the trade front and as earnings season begins."

Oil prices were supported ahead of the signing at the White House on Wednesday of a Phase 1 trade deal, which marks a major step in ending a dispute that has cut global growth and dented demand for oil.

Still, with traders already pricing in the signing of the deal, there is more downside risk to prices, said Michael McCarthy, chief market strategist at CMC Markets.

"Regardless whether the deal is signed, we might have a buy the rumours, sell the fact scenario unfolding," he added.

Separately, U.S. crude oil inventories were expected to have fallen last week, a preliminary Reuters poll showed on Monday, helping to boost prices. 

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.

China's crude oil imports in 2019 grew by nearly 10 percent from the previous year on demand growth from new mega-refineries, customs data showed. 

Elsewhere, Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened U.S.-Iranian tension and wants to see sustainable prices and demand growth. 

Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander on Jan. 3 and Iran retaliated with missiles launched against U.S. bases in Iraq. But they slumped again as Washington and Tehran retreated from the brink of direct conflict last week.

Prince Abdulaziz said it was too early to talk about whether the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, would continue with production curbs set to expire in March.

(Reporting By Jessica Jaganathan; editing by Richard Pullin) ((Jessica.Jaganathan@thomsonreuters.com; +65 6870 3822; Reuters Messaging: jessica.jaganathan.thomsonreuters.com@reuters.net; Twitter: https://twitter.com/j3ssi3))

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