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Oil reaches 3-month highs, supported by low US inventories, trade progress

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Oil prices reached the highest level in three months in thin pre-Christmas trading on Thursday, buoyed by the previous day's news that US crude inventories declined and as US-China trade tensions continued to ease.

[HOUSTON] Oil prices reached the highest level in three months in thin pre-Christmas trading on Thursday, buoyed by the previous day's news that US crude inventories declined and as US-China trade tensions continued to ease.

Brent crude futures rose 37 cents to settle at US$66.54 a barrel, gaining for the sixth straight day.

US West Texas Intermediate (WTI) crude rose 29 cents to settle at US$61.22 a barrel.

Trading volume was thin, with oil headed for a third consecutive weekly rise. Prices were buoyed by China's Dec 13 decision to cancel a plan to impose additional tariffs on US imports on Dec 15 and the Phase 1 deal between Washington and China, which has eased trade tensions.

The deal between the world's two largest economies has improved the global economic outlook, lifting prospects for higher energy demand next year and underpinning oil prices.

"The market's happy with (Dec 15) tariffs out of the way and the trade truce, for now," said Bill Baruch, president at Blue Line Futures in Chicago.

In a further sign of thawing relations, China's finance ministry on Thursday published a new list of six US products that will be exempt from tariffs starting on Dec 26.

However, if US and Chinese officials fail to provide concrete details about their efforts to reach a trade agreement, oil prices could lose their upward momentum, said Gene McGillian, vice-president of market research at Tradition Energy in Stamford, Connecticut.

"Unless we get real granularity, the uncertainty around what's happening on the trade front will start to add more resistance. We need to see signs that a real resolution is at hand," Mr McGillian said.

Another development lifting prices was the agreement this month between the Organization of the Petroleum Exporting Countries and non-Opec producers such as Russia to deepen production cuts by a further 500,000 barrels per day (bpd) from Jan 1 on top of previous reductions of 1.2 million bpd.

Adding to the positive mood, weekly data from the Energy Information Administration showed US crude inventories dropped 1.1 million barrels in the week to Dec 13, while petrol and distillates stockpiles rose.

News of President Donald Trump's impeachment by the US House of Representatives failed to stir the oil market.

REUTERS