Oil Futures Advance on Positive Demand

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange settled the first session of the second quarter higher, fueled by optimism about U.S.-China trade talks and bullish Chinese manufacturing data that has improved the demand outlook from one week earlier.

West Texas Intermediate May contract gained $1.45 or 2.4% on Monday to settle at $61.59 bbl, the highest price point since November, while ICE Brent June futures surged $1.43 to $69.01 bbl, holding just below the $70.00 psychological mark. NYMEX ULSD May contract settled 1.67cts higher at $1.9881 gallon, while RBOB May futures rallied 1.64cts to $1.8989 gallon.

Oil futures rallied Monday afternoon as trade delegations from the United States and China are set for the final round of negotiations this week in Washington, D.C. U.S. President Donald Trump and China's President Xi Jinping are expected to meet later this month to finalize a highly anticipated agreement to end the trade dispute between the world's two largest economies.

On Friday, Trump said the agreement would be "a very comprehensive deal with detailed enlisting of problems we have had with China over the years." The final stretch of trade talks follows reported concessions from China, while Beijing scrapped on Sunday 25% tariff imposed on U.S. vehicles as a tit-for-tat measure. U.S. officials said last week China made unprecedented proposals on various issues from protecting intellectual property rights to access for American goods into China's markets that go further than previous commitments.

Amid progress in trade discussions, China's manufacturing activity expanded unexpectedly in March, easing some concerns of a widespread growth slowdown that have dampened markets in recent months. Key indices showed the manufacturing sector in the second largest economy returned to growth last month at the fastest pace in eight months after four months in contraction.

The United States reading on manufacturing activity for the final month of the first quarter came in mixed, with Institute for Supply Management PMI showing expansion at a higher rate compared to IHS Markit survey, which missed expectations.

Optimism about trade talks and upbeat manufacturing data from China rallied both equities and oil markets on the opening day of the second quarter. Major U.S. stock indexes surged in Monday trading, with Dow Jones Industrial Average ending the session with a 1.27% gain at 26,258.42, while S&P 500 Index jumped 1.16% to 2,867.19. According to the Wall Street Journal, investors are putting more money into U.S. stocks with current market consensus for both equities and oil markets to remain robust and bullish in the second quarter.

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