HOUSTON, Dec. 14 (Xinhua) — Oil prices increased for the week ending Dec. 13, with the price of West Texas Intermediate (WTI) for January delivery up 1.47 percent and Brent crude oil for February delivery up 1.29 percent.
After China and the United States agreed on the text of a phase-one economic and trade agreement, WTI closed the week at 60.07 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 65.22 dollars a barrel on the London ICE Futures Exchange, both hitting three-month high.
Oil prices surged in September after drone attacks hit Saudi Arabia’s key oil facilities and forced the country to cut its crude oil output by half. On Sept. 16, WTI settled at 62.9 dollars a barrel, while Brent crude closed at 69.02 dollars a barrel.
WTI and Brent crude prices have increased 32.28 percent and 21.23 percent, respectively, so far this year, falling from their peak levels in April when the growth of WTI hit over 40 percent, and Brent crude over 30 percent.
On Monday, oil prices dropped slightly, following big gains in the previous week, as investors continued to observe whether the Organization of the Petroleum Exporting Countries (OPEC) and its allies would follow through their promise to deepen crude output cuts.
The organization and its allies agreed last week to steepen production cuts by an additional 500,000 barrels a day, bringing the total cuts to 1.7 million barrels daily. This additional adjustment would be effective as of Jan. 1, 2020 and is subject to full conformity by every participating country.
The prices dropped again on Wednesday after data showed an unexpected build in U.S. crude inventories. U.S. commercial crude oil inventories increased by 0.822 million barrels from the previous week, defying market expected draw of 2.763 million barrels, which implied weaker demand and bearish for crude prices.
However, the trade optimism overshadowed the unexpected build in U.S. crude inventories. Oil prices rose on Tuesday, Thursday and Friday, buoyed by an improved outlook for crude demand as investors were more optimistic about global trade prospects.
In particular, oil prices increased by over 1.50 percent on Friday as trade optimism lifted investors’ sentiment.
China and the United States have agreed on the text of a phase-one economic and trade agreement based on the principle of equality and mutual respect, according to a statement issued by the Chinese side on Friday.
Oil prices have kept gaining momentum since the start of the year due to some geopolitical concerns and the OPEC’s decision of production cut. However, the momentum has slowed down, mainly because of the concerns over downturn in demand for crude oil.
Moreover, a rising U.S. dollar in the past months has dragged down the greenback-denominated crude futures as the U.S. Dollar Index has been keeping uptrend since mid-2018, although the dollar index finished the week ending Dec. 13 lower.
The index managed to recover from multi-month lows on Friday. Analysts believed the index still struggles to seek support at the 97.00 and 96.70 levels.
For the coming week, the market will further digest information about the U.S.-China “phase one economic and trade agreement.”
The agreement will help the two countries enhance economic and trade cooperation, effectively manage, control and resolve differences, and promote the steady development of bilateral economic and trade relations.
As the global economy faces downward pressure, the agreement will boost confidence of the global market, stabilize market expectations, and create favorable environment for normal economic, trade and investment activities.
Moreover, latest data showed that oil prices will move under downward pressure into 2020.
In its year-end Short-Term Energy Outlook released last week, the U.S. Energy Information Administration (EIA) forecast that Brent spot prices will be lower on average in 2020 than in 2019 due to forecast of rising global oil inventories, particularly in the first half of next year.
EIA forecast Brent spot prices will average 61 U.S. dollars per barrel in 2020, down from a 2019 average of 64 dollars per barrel, while WTI prices will average 5.50 dollars per barrel less than Brent prices in 2020.
The latest forecast was issued after OPE and its allies announced they were deepening production cuts originally announced in December 2018.
Meanwhile, the International Energy Agency (IEA) said in its December report published last week that global oil demand will average 6.148 million barrels per day in 2020, a 4.6 percent drop from the level in 2019, which would put downward pressure on oil prices.