LONDON (Reuters) – Oil prices rose to three-month highs on Monday, underpinned by optimism over an expected China-U.S. trade deal and upbeat industrial data, while traders kept a close watch on the Middle East following U.S. air strikes in Iraq and Syria.
Brent crude futures LCOc1 were up 0.9% at $68.75 a barrel, up 59 cents. The international benchmark has risen around 27% in 2019.
West Texas Intermediate (WTI) crude futures CLc1 rose 22 cents or 0.2% to $61.94 a barrel by 0940 GMT. The U.S. benchmark is up about 36% so far this year.
“Oil prices have reached their highest level since the Saudi oilfield attack in mid-September”, said market analyst Margaret Yang of CMC Markets.
Despite a the relatively low price gains despite an array of bullish factors, Yang added: “Traders are also cautious about profit-taking possibilities.”
Tensions in the Middle East have flared up as the United States carried out air strikes on Sunday against the Kataib Hezbollah militia group, while protesters in Iraq on Saturday briefly forced the closure of its southern Nassiriya oilfield.
Meanwhile, Libyan state oil firm NOC said it is considering the closure of its western Zawiya port and evacuating staff from the refinery due to clashes nearby.
Oil prices were also supported by declining U.S. crude stocks, which fell by 5.5 million barrels in the week to Dec. 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters poll.
In China, factory activity had likely expanded again in December on stronger external demand and an infrastructure push at home although the pace of growth is set to ease as markets await more certainty on a U.S.-China trade truce, a Reuters poll showed.
China’s Commerce Ministry said it is in close touch with the United States on the signing of a long-awaited trade deal.
The two countries on Dec. 13 announced a “Phase one” agreement that reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods.
Some analysts, however, cited abundant global crude stocks as a major obstacle in 2020 to efforts to rein in output by the Organization of the Petroleum Exporting Countries and its allies like Russia.
“Even as OPEC and its non-OPEC partners endeavor to make additional supply cuts in Q1 2020, we are not convinced this will be sufficient to avert large global inventory,” said Harry Tchilinguirian, global oil strategist at BNP Paribas.
“We remain of the opinion that oil fundamentals continue to present downside risk.”
Additional reporting by Seng Li Peng, editing by Louise Heavens