Oil Higher in Friday Trade

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Intercontinental Exchange Brent futures traded higher in early trading Friday on reports the Trump Administration may be weighing the possibility of easing tariffs on China in a bid to push forward trade talks.

In midmorning trade, Nymex February WTI futures shifted $1.10 higher to $53.17 barrel (bbl) while ICE March Brent was up $1.18 to $62.36 bbl. Nymex February ULSD futures gained 2.29 cents to $1.9072 gallon, while February RBOB futures advanced 2.42 cents to a $1.4542 gallon.

Wall Street Journal reported Thursday U.S. Treasury Secretary Steven Mnuchin proposed lifting all or some of the tariffs on Chinese imports to give Beijing a reason to make deeper concessions in continued trade talks between the two countries. However, U.S. Trade Representative Robert Lighthizer who is known to be a hardliner on trade initially "resisted the idea as a sign of weakness," the Wall St. Journal report added.

The report sent equities higher Friday morning, with the Dow Jones Industrial Average advancing 150 points at the open, while the S&P 500 Index and Nasdaq gained 0.7% and 0.6%, respectively.

The White House discussions come ahead of a meeting between senior trade officials from China, including Chinas chief trade negotiator, Vice Premier Liu He, and U.S. officials, including Lighthizer, in Washington, D.C. on Jan. 30-31.

Oil futures were also supported by the International Energy Agency forecast for strong oil demand growth in 2019, according to its Monthly Oil Market Report released Friday morning. IEA expects world oil demand to increase by 1.4 million barrels per day (bpd) for this year, as lower oil prices offset the slowdown in global economic growth. However, oil demand growth from the 35-country bloc Organization for Economic Cooperation and Development is seen slowing from 390,000 bpd last year to 280,000 bpd in 2019 at 48.1 million bpd, with the United States to account for 82% of the growth. Oil demand from non-OECD countries is expected to increase 1.15 million bpd this year following an 875,000 bpd annual increase in 2018, with China and India to account for 62% of the growth.

In December, IEA estimates global oil supply declined by 950,000 bpd to 100.6 million bpd, although up 2.8 million bpd against year prior. OPEC crude oil output dropped 590,000 bpd last month to 32.39 million bpd.

"Saudi Arabia cut back from record highs while Iran and Libya saw further losses," said IEA, noting the decline came as OPEC plus Russia and nine non-OPEC oil producers reached an agreement to cut oil output 1.2 million bpd for the first half of 2019. "Data show that Russia increased crude oil production in December to a new record near 11.5 million barrels per day, and it is unclear when it will cut and by how much. Other non-OPEC countries joining in the output deal saw higher output, including Mexico," said IEA.

The Paris-based energy agency projects output from countries not part of Organization of the Petroleum Exporting Countries to increase 1.6 million bpd this year to 61.9 million bpd after a record annual increase in non-OPEC supply of 2.6 million bpd in 2018.

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