WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on Intercontinental Exchange surged in afternoon trade Friday, with both West Texas Intermediate and Brent advancing to eight-week high settlements following bullish comments on U.S.-China trade talks from a key White House adviser, reigniting hopes for a looming resolution in a year-long trade war.
Friday afternoon traders also turned their focus to the continued decline in U.S. drilling activity after Baker Hughes reported the number of oil rigs fell 10 this week to a new 31-month low. U.S. oil rigs declined for the fourth straight week through Friday, with the count down 214 against year ago including 39 pulled from service in the fourth quarter alone.
At settlement, NYMEX December WTI futures rallied $0.95 to $57.72 per barrel (bbl), with the January contract at a modest $0.11/bbl premium. ICE January Brent futures spiked $1.02 to a $63.30/bbl settlement -- the highest settlement on the spot continuous chart since mid-September. Product futures also posted strong gains on the session, with December ULSD futures surging 3.01 cents to $1.9480 per gallon, an eight-session high on the spot continuous chart. December RBOB futures moved up 1.92 cents to end the session at $1.6350/gallon.
U.S.-China trade headlines dominated the trading session on Friday, sending both equities and oil futures sharply higher. Larry Kudlow, an economic adviser for President Donald Trump, said both sides are getting closer to striking a deal, as negotiations were set to resume Friday via a telephone call. Feeding into the sentiment, U.S. Commerce Secretary Wilbur Ross assured markets Friday there was high probability the United States would reach a final agreement on a phase one trade deal.
All three U.S. stock indexes closed at the record highs Friday, with the Dow Jones Industrial Average having advanced 222.93 points to 28,004.89 and the S&P 500 rose 0.8% to 3,120.46, while the Nasdaq climbed 0.7% to 8,540.83.
Pushing markets higher, U.S. Federal Reserve Chairman Jerome Powell also offered upbeat comments this week on the U.S. economy, calling it the "star economy," standing out against peers in the developed world. Powell and other Fed officials have all expressed optimism and have signaled a long pause in raising rates.
Separately, International Energy Agency revised higher global oil demand estimates in the third quarter by 1.1 million barrels per day (bpd) -- more than doubled from the second quarter. Still, the agency maintained its global economic growth and oil demand estimates for both 2019 and 2020, after downgrading oil demand growth four times this year.
"The health of the global economy remains uncertain in spite of recent positive news about the U.S.-China trade dispute," the report said.
On the supply side, IEA revised higher its estimates for non-OPEC production growth by 2.3 million bpd in 2020, with U.S. shale remaining the key driver behind the upward revision. Even as U.S. production remains the dominant source of non-OPEC growth, its contribution will slip to 54% in 2020 from 87% in the current year. Paris-based energy watchdog said this drop will be partly mitigated by up-and-coming production from Brazil, Norway and a new discoveries in Guyana.
Liubov Georges can be reached at firstname.lastname@example.org
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