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Oil closes in on US$72 as US, China reach trade truce
OIL advanced near US$72 a barrel as an economic truce between the United States and China eased fears of a trade war, and before a meeting on crude prices between the ministers of top producers Russia and Saudi Arabia.
Futures in New York rose as much as 0.9 per cent. US Treasury Secretary Steven Mnuchin said on Sunday the two nations are "putting the trade war on hold" as they work on a framework to balance trade.
Saudi Arabia's Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak are scheduled to meet this week in St Petersburg to discuss all issues related to the oil market, including prices, according to Mr Novak.
Oil traded in both New York and London is set for a third monthly gain after geopolitical tensions in the Middle East and the US reimposing sanctions on Iran's oil exports pushed crude to levels not seen for more than three years. While the Organization of Petroleum Exporting Countries (Opec) continues to tighten global inventories, data also showed that US crude rigs, an indicator for potential shale production, remained unchanged last week.
"Concerns eased over a potential trade war between the US and China, which could have hit economic growth, boosting positive sentiment among investors today," Kim Kwangrae, a commodities analyst at Samsung Futures Inc, said in Seoul. "The number of US rigs didn't rise after a good streak of gains, which is also a supportive factor for oil prices."
West Texas Intermediate (WTI) for June delivery, which expires on Tuesday, increased 0.6 per cent, or 40 cents, to US$71.68 a barrel on the New York Mercantile Exchanges at 3:02pm in Singapore. Prices climbed 0.8 per cent last week. Total volume traded was about 31 per cent below the 100-day average. The more-actively traded July contract rose 39 cents to US$71.76.
Brent futures for July settlement were 0.6 per cent higher at US$78.98 on the London-based ICE Futures Europe exchange. The contract posted a sixth straight weekly gain last week. The global benchmark traded at a US$7.22 premium to WTI for the same month.
Yuan-denominated futures dropped 0.8 per cent to 482.4 yuan a barrel on the Shanghai International Energy Exchange. Futures gained 3.3 per cent last week, a sixth weekly advance.
America and China agreed to "substantially" reduce the US trade deficit in goods with the Asian nation after two days of negotiations. Beijing promised to "significantly" increase purchases of US goods and services, which soothed the nerves of investors who worried that the two major economies were on the verge of an all-out trade war.
Explorers held drilling in check in the US oil market, with the number of rigs targeting oil unchanged at 844 last week, according to Baker Hughes data. That halted a six-week gaining streak and is only the fifth time this year that explorers have not boosted the rig count.
The meeting between Saudi Arabia and Russia expected during an economic forum later this week comes after Saudi Arabian oil minister Al-Falih expressed concern over recent volatility in the oil market. Russia's Mr Novak said on Friday that "we need to look at a longer period - at how stable this price is, how volatile or not it will be, what factors affect it."
Talks will continue when Opec and its allies gather in Vienna in June, Mr Novak added. Other oil-market news: In Venezuela, President Nicolas Maduro won another six-year term despite calls from the US to halt elections amid the threat of further isolation and sanctions on the crisis-stricken nation's all-important oil industry.
Iran said it has strategies to replace customers who selected to halt oil purchases and the Middle Eastern nation will use new methods to maintain its level of global crude supply, the country's oil ministry news service Shana reported, citing the spokesman of the parliament's energy commission.
Hedge funds reduced their net-long positions - the difference between bets on a price increase and wagers on a drop - on Brent futures for a fifth consecutive week, the longest stretch of declines since November 2016, according to ICE Futures Europe data.
Citigroup Inc raised its base-case 2018 oil-price forecast by US$10 to an annual average of US$75 a barrel, bank analysts including Ed Morse said in an emailed report on Monday. BLOOMBERG