Oil prices rebound as U.S., China trade tensions ease for now

Oil prices rebound as U.S., China trade tensions ease for now

Oil prices settled higher Monday, to recover much of what they lost last week, as U.S.-China tensions appeared to ease, but concerns over U.S. production growth lingered in the wake of a hefty weekly rise in domestic rig activity.

 Market Watch reports in its article Oil prices rebound as U.S., China trade tensions ease for now that the market saw a “nice relief rally…after U.S. officials backpedalled on a trade war with China over the weekend,” said Colin Cieszynski, chief market strategist at SIA Wealth Management Inc. The gains, however, were “still smaller than Friday’s declines, so it remains to be seen if this is a trading bounce or the start of a more serious advance,” he said. “With trade in the spotlight all week, we could see significant volatility and swings in both directions.”

On the New York Mercantile Exchange, May West Texas Intermediate crude CLK8, +1.29%  rose $1.36, or 2.2%, to settle at $63.42 a barrel. The contract fell 2.4% on Friday to tally a loss of roughly 4.4% for last week. June Brent crude LCOM8, +1.30% the global benchmark, added $1.54, or 2.3%, at $68.65 a barrel on ICE Futures Europe, after losing 3.2% last week.

Oil prices declined Friday, and suffered their worst weekly declines in two months. Prices had followed equity markets lower amid growing fears of a trade war between the world’s two largest economies. On Monday, crude oil tracked global stock prices higher on signs over the weekend that President Donald Trump’s administration may be softening its stance in the trade spat with China, though remarks from China’s foreign ministry and a tweet from Trump suggest the dispute could easily heat up again. “The market is currently concerned for the escalating China-U.S. trade war tensions—and with good reason since this [would] be bad for global growth and oil demand growth further down the line,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “However, oil market fundamentals are tightening, and oil prices look set to be squeezed higher as long as OPEC sticks to its cuts.”

The Organization of the Petroleum Exporting Countries and 10 countries outside the oil cartel, including Russia, have been holding back crude output by 1.8 million barrels a day since the start of last year. The agreement, which is set to expire at the end of 2018, helped crude prices climb more than 50% in the second half of last year. OPEC production fell in March to an 11-month low of 32.14 million barrels a day, down 250,000 barrels a day from February, led by output declines in Venezuela and Angola, according to a survey from S&P Global Platts released Friday. In the U.S., however, the number of rigs drilling for oil—a proxy for activity in the sector—was up by 11 last week, according to Baker Hughes BHGE, -0.61% a further sign of relentless U.S. crude output. Oil market observers are looking ahead to monthly reports from OPEC and the International Energy Agency, due Thursday and Friday, respectively, with an eye to potential revisions on the global oil demand. The Energy Information Administration will also release its monthly short-term energy outlook report Tuesday and weekly U.S. petroleum-supply data Wednesday.

The market is also keeping an eye on developments out of Syria, after reports an air base near Homs was struck by missiles. The U.S. also announced new sanctions on Russia Friday.

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