A worker makes adjustments to an oil pumping jack, also known as a nodding donkey, in the Bashneft PAO oilfield outside the village of Nikolo-Beryozovka near Neftekamsk, Russia (Photographer: Andrey Rudakov/Bloomberg)

Oil Caps Longest Gain in 17 Months on New Trade Talks, OPEC Cut

(Bloomberg) -- Oil notched its longest stretch of daily gains in more than 17 months as fresh trade talks between the U.S. and China added to optimism that a global supply glut will be averted.

Futures closed 1.2 percent in New York, reaching their highest settlement in three weeks. A U.S. delegation began new negotiations in Beijing as representatives of the world’s largest economies sought to ease tensions. That followed Federal Reserve Chairman Jerome Powell’s assurances on Friday that interest-rate hikes may be paused if the economy weakens.

Crude has rebounded this month after its worst fourth-quarter performance since 2014. Shipping data shows OPEC is following through on a pledge to curb supplies, and traders who had given up on the market late last year have come back in a buying mood in 2019, said Vikas Dwivedi, global oil and gas strategist for Macquarie Capital Inc. in Houston.

“It’s just a broadly reinvigorated market,” Dwivedi said by telephone. “A lot of these guys just said, ‘I’m going to turn it off’ at the end of last year and talk to their investors. But they’ve come back with a green light.”

While Goldman Sachs Group Inc. cut its 2019 oil-price forecasts on Monday, citing a re-emerging glut and resilient American shale output, the bank said the late-2018 price drop was excessive.

West Texas Intermediate for February delivery rose 56 cents to settle at $48.52 on the New York Mercantile Exchange. Prices have risen almost 7 percent so far this month, erasing most of December’s 11 percent decline.

Brent for March settlement advanced 0.5 percent to $57.33 on the ICE Futures Europe Exchange in London. The global benchmark crude traded at an $8.51 premium to WTI for the same month.

Powell’s dovish remarks helped push the U.S. dollar to its lowest level since October, a positive development for commodities such as oil that are denominated in the greenback.

Bullish Sentiment

“The statement from the Fed chair was in the direction of what the market bulls have wanted,” said Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Seoul. “At the same time, there’s increased expectation that OPEC+ will cut its production from this month.”

Traders still have to weigh the prospects of surging American supplies. Stockpiles at the key crude storage hub in Cushing, Oklahoma, probably rose by 700,000 barrels last week, according to a Bloomberg survey. Still, data from oilfield services provider Baker Hughes last week showed working oil rigs in the U.S. contracted for the first time since mid-December.

Oil Caps Longest Gain in 17 Months on New Trade Talks, OPEC Cut

American and Chinese officials began negotiations on Monday in the hope of reaching a deal during a 90-day truce in the trade war between the administrations of President Donald Trump and counterpart Xi Jinping.

Other oil-market news:
  • Gasoline futures dropped 0.5 percent to $1.3408 a gallon in New York.
  • Drillers in the Eagle Ford, the South Texas shale oil patch, will likely scale back activity in 2019 as lower prices hit cash flows, consultant Rystad Energy AS said.
  • Elliott Management Corp. made a $2 billion cash offer to take over QEP Resources Inc. as the activist investor continues its feud with the U.S. oil driller.

©2019 Bloomberg L.P.