Oil prices slipped on Monday, but held near recent three-month highs amid optimism that the United States and China are close to signing a trade deal, with President Donald Trump saying an agreement would be signed “very shortly”.
Brent crude LCOc1 was down 15 cents, or 0.2%, at $65.99 a barrel by 0306 GMT. West Texas Intermediate CLc1 was also down 15 cents at $60.29 a barrel.
A so-called phase one deal was announced earlier in December as part of a bid to end the months-long tit-for-tat trade war between the world’s two largest economies, which has sent shockwaves through markets and roiled global growth.
The United States is to agree to reduce some tariffs in return for a big increase in purchases by Chinese importers of American farm products, according to the deal that is due to be signed in January.
“We just achieved a breakthrough on the trade deal and we will be signing it very shortly,” Trump said at a Turning Point USA event in Florida on Saturday.
The easing of tensions has improved business confidence and boosted the outlook for economic growth and energy demand.
“Oil prices will continue to benefit from the positive developments in the U.S.-China trade,” said Stephen Innes, chief Asia market strategist at AxiTrader.
“With a more constructive global macro outlook than at any time in the last year, oil is well-supported by both fundamental factors and sentiment now,” he said.
U.S. drillers may be anticipating higher prices as well and last week increased the number of their oil rigs by the most in a week since February 2018.
Drillers added 18 oil rigs in the week to Dec. 20, bringing the total to 685, the most since November, Baker Hughes, an energy services company, said in its weekly report.
U.S. economic growth nudged up in the third quarter, latest data shows, and the economy appears to have maintained the moderate pace of expansion as the year ended, supported by a strong labor market.
Many investors are on holiday already with the end of the year around the corner and trading is thin, potentially accentuating market moves due to the lack of liquidity.
“With the holiday season upon us with much-reduced volumes and liquidity, some choppy daily moves can … be expected,” said Jeffrey Halley, senior market analyst at OANDA.