WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange consolidated in narrow ranges following light profit-taking late Monday. Both crude benchmarks are holding near 12-week highs ahead of weekly and monthly data to be released beginning Tuesday, while uncertainty over U.S.-China trade negotiations continues to limit the upside.
At settlement, NYMEX January West Texas Intermediate futures slipped $0.18 to $59.02 per barrel (bbl) and ICE February Brent contract shed $0.14 at $64.25 per bbl. NYMEX January ULSD futures retreated 0.79 cent to $1.9442 gallon, and January RBOB futures gained 0.74 cent to $1.6548.
Monday afternoon, crude contracts held onto most of their gains from late last week, partly spurred by an additional 500,000 barrels per day (bpd) in production cuts to 1.7 million bpd through the first quarter 2020 by the Organization of the Petroleum Exporting countries and 10 non-OPEC oil producing nations, while Saudi Arabia provided an added bonus, surprising the market by announcing a voluntarily cut of 400,000 bpd to last through the first quarter of 2020, holding its output below 9.744 million bpd. If abided, the new agreement will lead to 2.1 million bpd in production curbs early next year, with OPEC+ scheduled to meet again on March 5-6 to review their agreement.
Recent supportive economic news, especially from the United States where on Friday the Labor Department announced an unexpected large increase in U.S. employment of 266,000 for November and upwardly revised job gains for the previous two months, appears to have extinguished concern over a recession. The Federal Open Market Committee meets Tuesday and Wednesday and will provide an update on their outlook for the U.S. economy.
The bullish jobs report added to the OPEC+ cuts to bolster market sentiment, which comes in front of monthly outlooks this week, starting Tuesday with the Short-term Energy Outlook from the U.S. Energy Information Administration. This will be followed by a monthly report from OPEC, where the cartel will provide an update on compliance by members on Thursday. On Friday, Paris-based International Energy Agency will release an updated projection on the global supply-demand disposition for 2020.
Potentially squelching the bullish tenor to the market is the Dec. 15 deadline for a "phase one" U.S.-China trade deal to avoid another round of tariffs to be imposed on Chinese exports to the U.S. market.
Washington and Beijing have attempted to secure a trade deal that would put an end to tit-for-tat tariffs between the two countries, with talks having dragged on for more than a year.
Heightening concern over a global trade slowdown, overnight data from China and Germany showed sustained contraction in exports last month. China's exports dropped 1.1% in November contrary to expectations of a 0.7% increase, with exports to the United States plunging a steep 23% on month-worst drop in roughly a year.
A new 15% tariff on China's exports is set to go into effect on Dec. 15 that would cover roughly $165 billion in consumer goods, including smartphones and other electronics that is seen indirectly hurting global oil demand growth.
Liubov Georges can be reached at firstname.lastname@example.org
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