London — Oil prices rose on Thursday after U.S. President Donald Trump said Washington was “very close” to nailing down a trade deal with China and the Federal Reserve held interest rates steady and struck an optimistic tone on the outlook for the economy.
Brent crude LCOc1 rose $1.06 cents to $64.78 a barrel by 1502 GMT. West Texas Intermediate crude CLc1 was up 90 cents at $59.66 a barrel.
Oil prices received a fresh boost after Trump tweeted “Getting VERY close to a BIG DEAL with China. They want it, and so do we.”
The outlook for oil demand has been clouded by U.S.-China trade tensions and uncertainty over whether a fresh round of U.S. tariffs on Chinese goods will come into effect on Sunday.
Trump was expected to meet with his top trade advisers on Thursday to discuss the Dec. 15 tariff deadline, sources have told Reuters.
China’s commerce ministry said Beijing and Washington were in close communication, declining to comment on possible retaliatory steps if Trump imposes the extra tariffs.
Prices had fallen on Wednesday after a report showed an unexpected increase in U.S. crude inventories. The market picked up on Thursday, although the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) offered different prospects for the oil market in 2020.
IEA pointed to pressure on oil prices, predicting a sharp rise in global inventories despite an agreement by OPEC and its allies to deepen output cuts as well as lower expected output by the United States and other non-OPEC countries.
The focus, however, was more on OPEC which said it now expected a small oil market deficit in the next year, suggesting the market is tighter than previously thought.
OPEC and others including Russia agreed last week to rein in output by an extra 500,000 bpd in the first quarter of 2020.
Oil prices were also supported by the U.S. Federal Reserve keeping interest rates unchanged at a meeting on Wednesday.
The European Central Bank also kept its ultra-easy monetary policy unchanged on Thursday, even keeping the door open to more stimulus.
“While oil prices are trending higher benefiting from a dovish Fed, a weaker USD, the IEA reiterates that despite the deeper oil production cuts, the oil market is likely to be oversupplied in 1H20,” said UBS oil analyst Giovanni Staunovo.
Oil prices fell on Wednesday after the U.S. Department of Energy’s report showed an unexpected rise in U.S. stocks.[EIA/S]
Inventories of petroleum products also increased with gasoline stocks surging by more than 5 million barrels.
Analysts blamed much of the dip in gasoline demand on winter storms that brought heavy snow to several states, making many roads unfit for driving.
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