WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged higher early Monday, with West Texas Intermediate trading at a 1-1/2 week high supported by swift resolution in a U.S.-- Mexico dispute over migration and trade, while a steep drop in the U.S. rig count offered additional support.
Near 9 a.m. ET, NYMEX July WTI futures were up $0.25 near $54.25 per barrel (bbl), with ICE August Brent flat near $63.25 bbl. NYMEX July RBOB futures firmed at $1.74 gallon, with the July ULSD contract inching higher at $1.8265 gallon.
Oil futures extended gains in early trade Monday after the United States reached an immigration deal with Mexico, easing some concerns of investors over looming tariffs on the southern neighbor. U.S. President Donald J. Trump said on Friday his administration suspended "indefinitely" a planned 5% increase in tariffs on Mexican goods after the country agreed to send additional troops to secure the borders.
Mexico also agreed to authorize the entry of migrants deported from the United States to await the resolution of the asylum case. Trump said the United States could go back to its original position if Mexico does not cooperate on the agreed deal.
Markets reacted positively to the news, with Dow Jones Industrial Average futures index rose solidly Monday morning, pointing to a 120-point gain at the open for equities.
Despite the positive resolution in the U.S.-Mexico tariff dispute, trade tensions with China still loom large over the global markets. International Monetary Fund said this weekend U.S.-China trade war represents the biggest risk for the global economy, while retaliatory duties from China could reduce global gross domestic product by $455 billion. Word Bank lowered last week its forecast for the growth in global trade by a full percentage point for the current year.
WTI was also supported by declining rig count in the United States, which dropped to a 16-month low last week. Baker Hughes data showed on Friday U.S. active rig count tumbled 11 to 789 after falling the total of 27 in the second quarter. While production in the United States reached a record 12.4 million barrels per day (bpd) in the last week of May, the decline in the rig count suggests softening output in the coming weeks.
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