Picture: 123RF/PAN DENIM
Picture: 123RF/PAN DENIM

London/Tokyo — Oil prices rose on Tuesday on hopes of progress towards a trade agreement between the US and China, the world’s biggest oil users, and predictions of a draw in US crude inventories.

Brent crude, the international benchmark for oil prices, was up 20c at $63.85 at 9.58am GMT. West Texas Intermediate (WTI) crude rose 19c to $58.20.

Top US and Chinese trade negotiators held a phone call on Tuesday morning, China’s commerce ministry said, as the two sides try to hammer out a phase-one deal in a trade war that has dragged on for 16 months.

The call took place amid heightened tensions between Beijing and Washington, with China saying it had summoned the US ambassador on Monday to protest against the passage in the US Congress of the Hong Kong Human Rights and Democracy Act.

“Oil traders remain hopeful a trade deal will get signed,” said Stephen Innes, chief Asia market strategist at AxiTrader.

On the supply side, oil cartel Opec meets on December 5 in Vienna, followed by talks with other oil producers, including Russia, a group known as Opec+, that have agreed to cut output to support prices.

“The current consensus is that the Opec+ supply agreement will be rolled over for at least three months at the group’s next meeting with special emphasis on stricter compliance,” Tamas Varga of oil brokerage PVM said. “It would help a great deal to balance global oil inventories in 2020. This prevents oil prices from falling.”

Analysts at JPMorgan also think Opec+ may extend the output cuts until the end of 2020, the bank said in a note.

In the US, crude oil stockpiles are expected to have declined by 300,000 barrels last week, according to a Reuters poll of analysts. The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA).

“Confirmation of a stock draw from the API today and the EIA tomorrow could offer some immediate support to the market, with the last stock drawdown seen in mid-October,” ING analyst Warren Patterson said.

The API is scheduled to release its data for the latest week at 9.30pm GMT on Tuesday, and the weekly EIA report is due at 10.30am on Wednesday.

Reuters