Crude Futures Up on Trade Talk, Supply

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange crude oil futures nearest delivery and Intercontinental Exchange Brent futures ended Tuesday's session higher. This was the seventh straight higher session, based on optimism around U.S.-China trade talks and hopes for a more-balanced global oil market in the first quarter of 2019.

NYMEX February West Texas Intermediate futures shifted $1.26 higher to $49.78 bbl, while ICE March Brent registered a $1.39 advance to $58.72 bbl. NYMEX February ULSD futures gained 4.86cts to settle at $1.8270 gallon and February RBOB futures rallied 2.18cts to $1.3608 gallon at the end of Tuesday trade.

Bullish sentiment in oil markets was bolstered Tuesday afternoon as delegates from the United States and China agreed to extend the trade talks into Wednesday, a fresh sign the negotiations are moving in a positive direction. Wire services reported the start of trade talks between the world's two largest economies needed more time in order to address the issues that were part of the agenda.

Equities jumped on the news, with the Dow Jones Industrial Average up over 200 points at the end of its first three-day winning streak since November. President Donald Trump and Chinese President Xi Jinping agreed on Dec. 1 to postpone more tariff hikes on each other's countries for 90 days, allowing for continued negotiations. A positive resolution to the trade dispute is widely viewed by markets as supportive to crude oil demand and prices, as China is one of the biggest importers of crude oil in the world.

In the oil market, Saudi Arabia's crude export reduction of 800,000 barrels per day below November level has become a decisive factor for global oil prices at the start of the year. A survey by S&P Global Platts indicates the Organization of Petroleum Exporting Countries' de-facto leader lowered its output by 401,000 barrels a day in December to 10.6 million barrels a day, while OPEC's cumulative production fell by 630,000 barrels a day to a six-month low of 32.43 million barrels from November level.

According to reports, OPEC and non-OPEC monitoring committee would meet in Baku, Azerbaijan, at the end of February or the beginning of March to review the current production agreement to cut output by 1.2 million bpd, which took effect Jan. 1.

The meeting will be held ahead of an already scheduled biannual April review, as producers aim to inject stability into the oil market. The UAE official also indicated OPEC and allied oil producers will do what is needed if the current agreement is not enough to balance the market in 2019.

Liubov Georges can be reached at Liubov.georges@dtn.com

(BAS)