Oil prices slipped Monday, but held near two-month highs, as U.S.-China trade uncertainty continued to keep a lid on a generally bullish market.
Prices spent some time in positive territory very early and remained near the two-month closing highs scored last Thursday as “the trifecta of positivity: U.S.-Sino trade talk optimism, OPEC+ compliance and a sturdy U.S. macro data scrim, should continue to resonate” with oil bulls, said Stephen Innes, chief Asia market strategist with AXI Trader.
West Texas Intermediate crude futures for January delivery CLF20, -0.09% were recently down 9 cents, or about 0.1%, at $57.68 a barrel on the New York Mercantile Exchange but had traded up to $57.92. January Brent crude BRNF20, -0.03%, the global benchmark, lost 9 cents, or 0.1%, at $63.30 a barrel on ICE Futures Europe.
Oil futures hit a two-month high on Thursday before choppy trading action took over at week’s end when China’s President Xi Jinping said Beijing wants to work with the U.S. for a trade deal, but was not afraid to “fight back” to protect its own interests, according to the Associated Press.
“Traders will be looking for any positive signs that the much-discussed face to face between the U.S. and China will take place before Dec. 15 when the U.S. is scheduled to impose more tariffs,” said Innes.
The front-month U.S. benchmark WTI contract ended 0.1% lower last week, while Brent, the global benchmark, logged a weekly gain of roughly 0.1%. Both grades ended Thursday at their highest levels since Sept. 23.
“Given WTI moved to multiweek highs on Thursday, the bulls are broadly in control,” said Richard Perry, analyst with Hantec, in a note. Perry pegs near-term resistance at $58.65 and then $59.40 for WTI. He’s advising clients that as a “run of higher lows and higher highs continues, we see buying into weakness as the strategy.”
Oil prices have climbed of late as global supplies have fallen so far this year thanks to efforts by the Organization of the Petroleum Exporting Countries and its allies, but growth in U.S. shale output and a slowdown in crude demand threaten to ruin that progress.
Those are among the big issues that the group will deal with when it holds meetings to discuss the oil market on Dec. 5-6 in Vienna. As officials ready to meet, global benchmark Brent trades around 19% higher year to date, after posting a yearly loss of almost 20% in 2018, according to Dow Jones Market Data.
A combination of improved OPEC compliance, expectations for an extension of cuts from the group beyond March 2020 and slowing U.S. production growth have all added up to a bullish picture for crude oil. In support of that last factor, Baker Hughes BKR, -0.75% on Friday reported a fifth consecutive weekly decline in the U.S. oil-rig count. The number of active U.S. rigs drilling for oil fell by 3 to 671.
“Expectations are building for action to be taken by OPEC+,” ING strategists said in a note. The cartel will need to deepen cuts and extend them through June 2020, the strategist group said, as “failing to do so would mean the risk of weaker prices, given the scale of the surplus forecast over the first half of 2020.”
But, they added, notable price rises this week “could send the wrong message to OPEC+ members, possibly signaling that deeper cuts are not needed.”
In other energy trading, December gasoline RBZ19, -0.76% fell 0.6% to $1.6649 a gallon, settling 2.4% higher for last week, while December heating oil HOZ19, +0.25% gained 0.3% to $1.935 a gallon; it fell 1% last week.
December natural-gas futures NGZ19, -4.80% fell 3% to $2.584 per million British thermal units, after it fell around 0.9% last week.