WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange rallied on Friday, with both crude benchmarks advancing to three-month high settlements after the United States and China consummated a phase one trade deal and Britain's elections cleared the path for a final Brexit next month, spurring a rally amid upbeat sentiment across global markets.
NYMEX January West Texas Intermediate futures added $0.89 for a $60.07 per barrel (bbl) settlement, while gaining 1.5% on the week and ICE February Brent contract rallied $1.02 to $65.22 bbl, posting a 1.3% weekly gain. NYMEX January ULSD futures surged 3.56 cents to $1.9864 gallon and January RBOB contract spiked 3.49 cents to a $1.6632 gallon better than two-week high settlement on the spot continuous chart. Both product contracts posted a better than 1% increase this week.
Under terms of the U.S.-China trade deal, Beijing pledged tougher enforcement of intellectual property laws and to increase purchases of agricultural and energy products from the United States. In turn, Washington will cancel a 15% tariff on $160 billion of Chinese goods that was scheduled to take effect on Sunday (12/15) and will cut a 15% levy to 7.5% on about $120 billion of Chinese products. An existing 25% tariff on $250 billion worth of goods will remain in place.
According to trade representatives, both countries will now proceed to set arrangements for signing the final document.
Pundits were quick to point out obvious gaps in the agreement, like China's cross-subsidizing certain industries.
Trade uncertainty has weighed on global oil demand growth, prompting the three major forecasters -- the Energy Information Administration, the International Energy Agency and the Organization of the Petroleum Exporting Countries -- to slash their oil-demand growth estimates over the course of this year. IEA said this week global oil inventories could still rise by 700,000 barrels per day (bpd) in the first quarter 2020 despite OPEC and its allies agreeing to deepen production cuts by 2.1 million bpd prior Friday.
Markets also cheered the decisive victory for U.K. Prime Minister Boris Johnson and his party on Thursday, which clears the way for Britain to exit the European Union at the end of January. Both developments lift clouds of uncertainty for global trade and cross-border investments.
Liubov Georges can be reached at firstname.lastname@example.org
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