Oil Futures Again Advance Thursday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied to fresh highs as market sentiment shifted to bullish in December with the announcement of a U.S.-China trade deal, which is seen bolstering global economic growth.

U.S. equity indexes again advanced Thursday, with the Dow Jones Industrial Average and S&P 500 Index again reaching fresh record highs, while the U.S. dollar softened on indications the Federal Reserve will leave the key federal funds rate unchanged at 1.5% to 1.75% throughout 2020.

NYMEX February West Texas Intermediate futures settled up $0.57 at $61.68 per barrel (bbl), with February Brent on ICE widening its premium to WTI to a $6.24 bbl four-week high. February Brent settled $0.72 higher at $67.92 bbl, ending at a $0.16 premium to the March contract. NYMEX January ULSD futures gained 1.58 cents with a $2.0521 gallon settlement, a 14-point discount to the February contract. NYMEX January RBOB futures surged 2.67 cents to a $1.7537 gallon settlement, ending at near parity with the February contract.

Thursday's settlements are the highest since Sept. 16 when oil futures spiked in response to an attack on Saudi Arabia's oil infrastructure. A recent report from the United States indicates the attack came from the north, placing blame on Iran for the precision missile and drone attack that briefly cut Saudi crude production in half.

Beijing earlier Thursday indicated it remains in close contact with Washington as the final details of a phase one trade deal are worked out. U.S. President Donald Trump said Tuesday the agreement is completed and will be signed at the White House by him and China's Xi Jinping. The signing could take place during the first week of January. Details of the agreement will be made public once signed.

The initial agreement on trade between the world's two largest economies staved off an escalation in their trade dispute, with the more than yearlong trade dispute and barrage of import tariffs having slowed global economic growth.

Geopolitics were also in play during the session following Christmas Day, with China, Iran and Russia to conduct joint naval drills Friday in the Indian Ocean and Gulf of Oman, according to Reuters. The naval drills come amid elevated tensions between Tehran and Washington over Iran's nuclear program and U.S. sanctions on Iran's oil exports among other parts of its economy.

Iran is also confronting more protests following two weeks of protests in November when as many as 1,500 people were said to have been killed as Tehran used excessive force in quelling the unrest sparked by an increase in fuel prices.

Oil futures found support from data from the American Petroleum Institute that showed a large 7.884 million bbl draw in commercial crude supply to 444.081 million bbl during the week-ended Dec. 20, with U.S. refiners processing 435,000 barrels per day (bpd) more crude oil than week prior. Gasoline supply increased a modest 566,000 bbl to 241.365 million bbl, and distillate stocks increased 1.681 million bbl to 126.423 million bbl during the week profiled.

The Energy Information Administration will publish its weekly data set 11 p.m. E.T. Friday.

Brian L. Milne can be reached at brian.milne@dtn.com


Brian Milne