Crude Futures Consolidate Near Highs

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange moved mostly higher in market-on-close trade Monday. Both crude benchmarks settled at fresh three-month highs, rising alongside equity markets amid a de-escalation in trade tensions after the United States and China announced a partial trade deal last week.

After a choppy, narrow-ranged trade session, NYMEX January West Texas Intermediate futures settled up $0.14 at $60.21 per barrel (bbl), with the January options contract expiring this afternoon. January WTI futures expires Thursday, with the February contract trading at a $0.07 discount in the backwardated market. ICE February Brent added $0.12 for a $65.34 bbl settlement. NYMEX January ULSD futures surged 1.81 cents to a three-month spot high $2.0045 gallon settlement, and the January RBOB contract dipped 0.05 cents at $1.6627 gallon.

A weaker U.S. dollar, which dropped 0.2% in afternoon index trade to a five-month low 96.965 settlement, boosted WTI futures.

The oil complex continues to draw support from the recently announced preliminary trade deal between the United States and China, even as some details of the agreement remain murky. Both countries suspended planned tariffs on roughly $260 billion in goods traded between the two economies after Beijing reportedly agreed to buy large quantities of American products including crude oil and liquefied natural gas exports.

U.S. Trade Representative Robert Lighthizer, a key negotiator in the yearlong trade discussion, said the United States will double exports to China in two years.

A 25% levy on roughly $250 billion of Chinese imports to the United States remains, while the phase one agreement cuts in half a 15% tariff on $120 billion of products. The tariff reduction will take effect 30 days after the agreement is signed.

According to trade representatives, both countries are looking to sign an agreement during the first week of January and negotiations on the second part of the deal will start immediately thereafter.

Global stock markets rallied on Monday, lifting major U.S. indexes to fresh highs in another record-breaking trade session. Dow Jones Industrial Average gained more than 130 points to 28,270.77 and S&P 500 Index advanced 0.8%, with both indices snatching four-session winning streaks today.

Monday afternoon, markets also focused on better-than-expected economic data from the United States and China, detailing an uptick in manufacturing activity over the last two months of the fourth quarter. U.S. Purchasing Manufacturing Index showed a modest improvement in December, up 0.5 points to a 52.2 reading, keeping at a higher range of market expectations. In China, overnight data reported accelerated growth in the country's industrial and service sectors, up 6.2% last month -- the fastest annualized growth rate in the second half of 2019. In contrast to upbeat reading from the U.S. and China, Eurozone's PMI declined in a preliminary December reading, dragged lower by a slump in German industrial output and slowdown in the United Kingdom and France.

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

(CZ)

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