Oil prices gain as market awaits signals on trade talks

Oil gained after an American official hinted that the U.S. and China are close to locking down a partial trade deal, offsetting rising global oil supplies.

Futures rose as much as 0.9% in New York Friday morning after White House economic adviser Larry Kudlow said late Thursday negotiations between the two countries were coming down to the final stages. U.S. government data Thursday showed stockpiles unexpectedly expanded as production rose to a record, while the International Energy Agency said supplies outside OPEC will increase by 2.3 million barrels a day in 2020.

Overall though, “the market seems to have some optimism regarding the optimism behind trade talks.” said Gene McGillian, senior analyst and broker for Tradition Energy Group in Stamford, Connecticut. Yet, “we continue to see expectations of growing non-OPEC production.”

Oil is down 14% since an April peak as the spat between Beijing and Washington over trade dents demand and global inventories swell. The Organization of Petroleum Exporting Countries has indicated it won’t cut output deeper to stave off the impending surplus and predicts worldwide supplies will exceed demand by about 645,000 barrels a day in the first half of next year.

“There is still one fact that continues to cast a bearish shadow over the oil market: non-OPEC supply growth will outstrip the expansion in global oil demand next year,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.

West Texas Intermediate for December delivery gained 40 cents to $57.17 a barrel on the New York Mercantile Exchange as of 10:13 a.m. local time. The contract is down 0.5% this week.

Brent for January settlement rose 46 cents to $62.74 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.43 premium to WTI for the same month.

U.S. crude output increased by 200,000 barrels a day to 12.8 million a day last week, according to the Energy Information Administration. While nationwide crude inventories rose, stockpiles at the key storage hub of Cushing declined for the first time in six weeks.

“The market is still concerned since refinery runs were disappointing and we got a surprise build in crude supplies,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Moving forward, optimism around the trade deal should give us some support.”