Oil prices rose 1% on Tuesday, supported by hopes the U.S.-China trade deal will bolster oil demand in 2020 after a prolonged dispute between the world’s two largest economies dented global market sentiment.
The Phase 1 agreement between the United States and China has been “absolutely completed,” Larry Kudlow, a top White House adviser, said on Monday, adding that U.S. exports to China will double under the deal.
Brent crude LCOc1 futures gained 70 cents, or 1.1%, to $66.04 a barrel by 11:20 a.m. EST (1620 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 68 cents, or 1.1%, to $60.89 a barrel.
“Oil prices are cautiously higher as the market wants to see action and not just promises on the U.S.-China trade agreement,” Phil Flynn, an analyst at Price Futures Group in Chicago, said in a note.
The Phase 1 agreement does not mean tensions are going to fully dissipate any time soon, Dallas Fed President Robert Kaplan said on Tuesday.
“Phase 1 is better than not having a Phase 1 but it doesn’t mean there won’t still be trade uncertainty,” Kaplan said in an interview with Bloomberg TV. “I think the trade issues with China are going to go on for…years.”
The prolonged trade dispute has dampened oil demand and weighed on prices. Banks including JP Morgan and Goldman Sachs have revised up their 2020 price forecasts in the wake of the improving trade outlook and a new OPEC-led agreement to curb output.
The Organization of the Petroleum of Exporting Countries and allies such as Russia – a group known as OPEC+ – are making a further oil supply cut of 500,000 barrels per day from Jan. 1 to support the market.
This comes on top of the existing deal to trim supply by 1.2 million bpd that came into effect on Jan. 1 this year.
Also supporting prices on Tuesday, U.S. crude stockpiles were expected to have fallen last week, according to seven analysts polled by Reuters. Data is expected later on Tuesday from oil industry group the American Petroleum Institute, followed by government data due Wednesday.
