Oil Steady as Trade Hopes, Mideast Tensions Support, Dollar Weighs
Oil
prices were flat on Thursday, supported by signs of improving
Washington-Beijing trade relations and rising tensions in the Middle East but
pressured by a strong U.S. dollar.
Brent crude futures LCOc1 were unchanged at $66.00 a barrel by 1:33 p.m. EST (1833 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 was 17 cents lower at $60.89 per barrel.
The
dollar rose 0.5% .DXY, recovering from a six-month low after a downbeat
December left the index virtually unchanged for 2019. A stronger dollar makes
oil more expensive for holders of other currencies. Wall Street, which crude
futures usually follows, was also higher.
“Today’s
inability of the crude markets to follow equities higher largely related to
today’s significant strength in dollar,” Jim Ritterbusch of Ritterbusch and
Associates said in a note.
Losses
in oil prices were limited by optimism that a trade truce between the world’s
two largest economies will support energy demand. U.S. President Donald Trump
has said Jan. 15 would mark the signing of the U.S.-China Phase 1 trade deal.
“Any
delays could put a pullback in the market here,” said Bob Yawger, director of
futures at Mizuho in New York.
January
also marks the scheduled start of deeper output cuts by the Organization of the
Petroleum Exporting Countries and its partners, including Russia.
The
group agreed to cut output by a further 500,000 barrels per day (bpd) from Jan.
1, on top of their previous cut of 1.2 million bpd.
Russia
reported record high 2019 oil and gas condensate production C-RU-OUT of 11.25
million bpd, beating the previous record of 11.16 million bpd set a year
earlier, Energy Ministry data showed.
The
U.S. military carried out air strikes against the Iran-backed Kataib Hezbollah
militia group over the weekend. Angry at the air strikes, protesters stormed
the U.S. Embassy in Baghdad on Wednesday, although they withdrew after the
United States deployed extra troops.
“Heightened
tensions in the region involving Iranian-backed forces may introduce a certain
geopolitical risk,” consultancy JBC Energy said.
A
fall in U.S. crude inventories last week also supported prices. U.S. crude
stocks fell 7.8 million barrels in the week ended Dec. 27, compared with
analysts’ expectations for a decrease of 3.2 million barrels, data from the
American Petroleum Institute (API) showed on Tuesday.
Official
data from the Energy Information Administration (EIA) is due on Friday having
been delayed by two days by the New Year’s holiday.
In 2020, Brent is forecast to average $63.07 a barrel, up from December’s estimate of $62.50, while WTI is forecast to average $57.70 per barrel, up from December’s estimate of $57.30, a Reuters poll showed.