Hitting a seven-week high of $57.97
The we-a-trade-deal-soon slogan once again offered a basis for oil Friday, driving crude prices to seven-week highs.
U.S. rates West Texas Intermediate and London’s Brent rose by almost 2 percent each, egged on by record highs for all three big Wall Street stock indexes, where the optimism of a prospective trade deal was even greater.
After hitting a seven-week high of $57.97, NYME-traded WTI settled 95 cents, or 1.7 percent, at $57.72 per barrel.
ICE (NYSE: ICE) Futures-
traded U.K. Brent closed the regular U.S. trade up to $1.02, or 1.6%, to $63.30. Earlier, it rose to a peak of $63.64 for seven weeks.
Both crude benchmarks showed about 1% weekly gains.
“It’s the mindless cacophony of a trade deal-making its rounds again and everyone on Wall Street to NYMEX is latching on to it for a ride, irrespective of the fact that it’s the same racket we’ve been hearing for two weeks now— that a deal is coming,” said John Kilduff, a New York energy hedge fund partner Again Capital. “In order to prove the terms, there’s nothing on paper.”
White House economic advisor Larry Kudlow said on Thursday that the U.S. and China were close to securing a trade deal. His comments come after a week of volatility after reports that the two sides had hit a snag over trade talks. Chinese media on Friday fleshed out arguments that Chinese demand for U.S. farm products is nowhere near the level of purchases that Washington is insisting on in order to seal a partial phase one deal.
U.S. Commerce Secretary Wilbur Ross said Friday that U.S. and Chinese officials would hold a call later in the day, but added that the U.S. could still impose tariffs on Chinese goods, which are scheduled for Dec. 15.
“We have been here so many times where the market gets its hopes up and then it gets crushed,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida, said, expressing confidence that a deal might still happen.
Reuters, meanwhile, assisted the bullish theme in oil somewhat by reporting that the U.S. shale industry plans another spending freeze next year.
The industry has seen a sharp slowdown in production growth, as prolific oil and natural gas output has pressured prices and squeezed profits, the report said.
Producers have already said they expect to spend about $4 billion less in 2019 than in 2018, according to U.S. financial services firm Cowen & Co., quoted by Reuters. So far, 21 exploration and production companies tracked by Cowen have released 2020 capex guidance with 15 projecting declines, five with increases and one unchanged, for a 13% year-over-year spending decline.
Yet, Investing.com oil columnist Ellen R. Wald wrote on Thursday that traders needed to beware that shale oil companies were sometimes overly dramatic in expressing their growth concerns.
“These could be tactics designed to reduce analysts’ expectations, so when these companies reveal their Q4 earnings, their share prices won’t drop nearly as much,” Wald wrote.
“With Chesapeake Energy’s share price so low that it is about to be delisted from the stock exchange, it wouldn’t be surprising to see similar oil producers actively trying to decrease expectations,” she said.
Casting a further pall on the market, the International Energy Agency also said in its monthly report on Friday that OPEC and its allies face stiffening competition in 2020.
The IEA estimated non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year compared to 1.8 million bpd in 2019, citing production from the United States, Brazil, Norway and Guyana.