Impending China Deal, Larger Than Expected Crude Demand Growth Cause Oil Prices to Jump 2%

News of stock builds failed to dent trading optimism: File Image/PixaBay

After a typical seesaw trading week of gains and losses based largely on fear and sentiment, crude prices on Friday gained 2 percent after traders decided that the pluses of an impending trade deal between the U.S. and China outweighed concerns of increasing oil supplies.

Both Brent and West Texas Intermediate posted their second straight weekly gain on Friday of 1.3 percent and 0.8 percent respectively; the former climbed $1.02 to settle at $63.30 per barrel, while WTI rose 95 cents to settle at $57.72 per barrel.

Traders were galvanized by Wilbur Ross, U.S. commerce secretary, who said in an interview on Fox Business Network that there was a very high probability the U.S. would reach a final agreement on a phase one trade deal with China: "We're down to the last details now."

This outweighed concerns over the International Energy Agency estimating that supply growth from the U.S., Brazil, Norway, and Guyana would surge to 2.3 million barrels per day (bpd) next year compared with 1.8 million bpd in 2019.

Presumably traders took heart of the disclosure earlier this week by the Organization of the Petroleum Exporting Countries (OPEC) that while demand for its crude next year would be 1.12 million bpd less than in 2019, the 2020 surplus would be far less than originally feared at a paltry 70,000 bpd.

If that's not enough to assuage persistent concerns, contained in the IEA's latest monthly report is the disclosure that global oil demand in the third quarter of 2019 grew by 1.1 million bpd, more than double the 435,000 bpd in the previous quarter.

China was the largest contributor, with demand increasing by 640,000 bpd year-on-year, and the IEA forecasts a year-on-year acceleration in global growth of 1.9 million bpd for the final quarter of 2019.