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Futures Movers: Oil ends at 3-month high as the U.S. and China reach a preliminary phase one trade deal

Oil futures end higher on Friday, with U.S. and global benchmark prices at their highest levels since mid-September, after the U.S. and China said they have reached a preliminary agreement on a phase one trade agreement. Read More...

Oil futures ended higher on Friday, with U.S. and global benchmark prices at their highest levels since mid-September, after the U.S. and China said they have reached a preliminary agreement on a phase one trade agreement.

The lack of a trade agreement had been a major headwind to crude demand, but oil prices got a boost Thursday when President Donald Trump tweeted that the U.S. was “getting VERY close to a BIG DEAL with China.”

Some reports then emerged saying that Trump approved a phase-one trade deal with China, possibly averting new tariffs on some $160 billion in consumer goods that were set to take effect Sunday, and bolstering hope that the harm done to global economic growth may fade.

China confirmed Friday that it reached a deal on the text of a phase one pact, according to a translation reported by CNBC, but that the deal would need to first go through legal procedures before it is signed. Trump separately announced a phase one deal Friday and scrapped tariffs on Chinese goods that were set to go into effect on Sunday.

“The trade war is back in focus for the energy markets and the lack of clarity surrounding the status of the deal” caused significant volatility on Friday, said Tyler Richey, co-editor at Sevens Report Research.

U.S. benchmark prices briefly topped $60 a barrel for the first time since September, “which is positive from a near term momentum standpoint,” he said. “However, the key resistance band between $60 and $62 [a] barrel dating back to late May remains intact for now, leaving oil stubbornly rangebound for the time being.”

West Texas Intermediate crude for January delivery CLF20, +1.01% rose 89 cents, or 1.5%, to settle at $60.07 a barrel on the New York Mercantile Exchange. For the week, prices for the front-month contract rose 1.5%, according to Dow Jones Market Data.

February Brent crude BRNG20, -0.48% gained $1.02, or 1.6%, to finish at $65.22 a barrel on ICE Futures Europe, For the week, it ended 1.3% higher.

Front-mont prices for both WTI and Brent crude settled at their highest levels since Sept. 16.

“The question of whether WTI crude oil futures can break above multi-month resistance in the low $60s will depend on U.S.-China trade relations; a favorable deal with material tariff reductions will be supportive of a move higher in oil, while continued confusion on the status of the deal will keep energy markets capped,” said Richey.

On top of trade, a decisive victory for Boris Johnson’s U.K. Conservative Party in Thursday’s elections may remove another element of concern for assets considered risky like oil and stocks.

Prices for crude have been mostly drifting higher after central banks signaled a willingness to keep interest rates low and maintain economic stimulus for the foreseeable future which may help to boost the global economy and buoy crude demand. An agreement to further cut global production between members of the Organization of the Petroleum Exporting Countries and its allies in Vienna last week has also helped to support energy futures, despite signs of growing oil inventories.

Meanwhile, data Friday from Baker Hughes BKR, -0.34%  showed the first weekly increase in active U.S. oil-rigs in eight weeks, suggesting the potential for rise in production, but had little impact on prices for the session.

Back on Nymex, January gasoline RBF20, +1.73%  added 2.1% to $1.6632 a gallon, tallying a weekly rise of 1%, while January heating oil HOF20, +1.52%  rose 1.8% to $1.9864 a gallon, for a climb of 1.8% for the week.

January natural gas NGF20, -0.95%  shed 1.4% to $2.296 per million British thermal units, building a weekly loss of 1.6%.

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