The cartel will reportedly extend their cuts until midyear 2020: File Image/PixaBay
U.S. president Donald Trump on Tuesday said his country and China are closing in on a first phase trade deal agreement, and this caused more gains for crude prices, this time with Brent rising 62 cents to settle at $64.27 per barrel, and West Texas Intermediate climbing 40 cents to $58.41 per barrel.
According to Washington, trade negotiators from the two countries have agreed to keep working on remaining issues; Gene McGillian, vice president of market research at Tradition Energy, remarked that "The main support for prices is the idea that if we get an easing in the trade war, the fear of slowing conditions and the impact on oil and fuel demand growth will be taken out of the market."
Notably, the optimism overrode concerns stemming from the American Petroleum Institute reporting on Tuesday that U.S. crude inventories rose by 3.6 million barrels last week to 449.6 million; forecasts were for a decrease of 418,000 million barrels.
John Kilduff, founding partner, Again Capital
It wouldn't surprise me if the Saudis would go for more [production cuts]
Presumably adding support to prices in the days ahead was news on Tuesday that the Organization of the Petroleum Exporting Countries (OPEC) and Russia will likely extend their production cuts at least through midyear 2020. (the current agreement expires in March).
Helima Croft, global head of commodities strategy at RBC Capital Markets, said, "It's a very unsettled time for OPEC: the gulf between the haves and have nots has widened, [and] price relief has not been enough to stave off social unrest in a number of key producer states.
"There's no better option at this point: we've had almost like a second Arab spring."
John Kilduff, founding partner at Again Capital, observed, "It wouldn't surprise me if the Saudis would go for more [production cuts], to tighten the market even more than they have already."
For the record, Kilduff believed oil prices could go higher because currently the market is ignoring turmoil in the Middle East and is mostly focused on the U.S./China trade talks.