By Grant Smith
Oil jumped as China and the U.S. made progress in resolving the trade dispute that has weighed on global markets this year, offsetting signs that OPEC and its partners won’t make deeper cuts to supply.
Brent crude rose as much as 1.6% in London, reversing much of Wednesday’s 1.9% decline. China and the U.S. have agreed to proportionally roll back tariffs on each other’s goods in phases, a Chinese Ministry of Commerce spokesman said. OPEC and its allies are more likely to stick to their current output targets when the group meets next month, according to delegates across the coalition.
“We are seeing a decent comeback in the oil market today after the positive trade news,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “The oil market is in a better state than two weeks ago, but we are still in a fragile environment, where it won’t take a lot to tip the scale in a negative direction again.”
Oil is still down about 16% from the peak reached in April on concern that a sluggish global economy and climbing supplies from the U.S. and elsewhere will soon tip the market into oversupply. U.S. crude inventories surged by 7.9 million barrels last week, almost four times more than the median estimate in a Bloomberg survey.
See also: WTI to Stay at $50-$60 Amid U.S.-China Trade Delay: Mizuho
Brent for January settlement climbed as much as 96 cents to $62.70 a barrel on the ICE Futures Europe Exchange, and traded at $62.57 as of 8:34 a.m. New York time. The contract dropped $1.22 to $61.74 on Wednesday. The global benchmark crude traded at a $5.35 premium to West Texas Intermediate.
WTI for December delivery gained 93 cents, or 1.7%, to $57.28 a barrel on the New York Mercantile Exchange. The contract fell 88 cents to close at $56.35 on Wednesday.
The amount of tariff relief that would come in the first phase of a U.S.-China rollback, set to be signed in the coming weeks, would depend on the content of that agreement, spokesman Gao Feng said on Thursday without giving further details. The two sides had “constructive discussions” in the past two weeks, he said.
Russia’s Energy Minister Alexander Novak said on Wednesday that the market is rather balanced and a Brent price of more than $60 indicated that the situation is stable. Ministers from the Organization of Petroleum Exporting Countries meet in Vienna on Dec. 5 and 6.
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