LONDON (Reuters) – Oil prices held near three-month highs on Monday, supported by last week’s announcement of an initial trade deal between the United States and China.
Brent crude oil futures LCOc1 were up 19 cents, or 0.29%, to $65.41 a barrel by 1305 GMT, while West Texas Intermediate crude CLc1 was up a cent, or 0.02%, to $60.08 a barrel.
The United States and China announced on Friday a “phase one” agreement that will reduce some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of U.S. farm products and other goods.
“What the market needs now, though, is clarity around exactly what the deal entails,” analysts from ING Economics said. “The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is.”
The Friday agreement averted additional tariffs on Chinese goods totaling $160 billion that the United States was set to impose over the weekend.
U.S. Trade Representative Robert Lighthizer said on Sunday the deal would nearly double U.S. exports to China over the next two years and was “totally done” despite the need for translation and revisions to its text.
China’s State Council’s customs tariff commission said on Sunday it had suspended additional tariffs on some U.S. goods that were meant to be implemented on Dec. 15.
Progress on trade could jump start oil demand and ease fears of a glut which have weighed on prices, said Edward Moya, senior market analyst at OANDA.
“Oversupply concerns driving weaker oil prices over the first half of 2020 is the base case for many investors, but we could finally start to see improved data from the world’s two largest economies spearhead calls for a global growth rebound.”
Data from China on Monday showing industrial output and retail sales growth accelerating more than expected in November offered some support for oil prices.
But growth in China is expected to slow further next year, with the government likely to set its growth target at about 6% in 2020 compared with 6%-6.5% this year.
Brent has rallied this year, supported by production curbs by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, which this month agreed to lower supply by a further 500,000 barrels per day as of Jan. 1.
The decision, according to Saxo Bank commodity strategist Ole Hansen, “helped trigger a 25% increase in the combined crude long to 602,000 lots, the highest since May and the biggest one-week accumulation since December 2016”.
Additional reporting by Jessica Jaganathan; Editing by Jan Harvey and Mark Potter