- Oil has rallied in the new year, with a nine-day run of gains for West Texas Intermediate, its best run since 2010.
- Brent crude is also rallying. If those contracts close up Friday – a 10th consecutive session – it would be the futures’ best streak in 30 years.
- Oil plunged last month, but traders have been buoyed by positive sentiment out of US-China trade-war talks and efforts by major oil exporters to stabilise markets.
- Stephen Innes, the head of trading for Asia Pacific at the futures brokerage Oanda, said the market was “returning to some sort of order, having previously been out of whack.”
- Brent crude was up 0.6% as of 8:55 a.m. in London (3:55 a.m. ET).
The wobbles in stock markets have been grabbing all the attention lately, but oil is quietly enjoying a stunning rally into the new year.
Oil traders are factoring in an improvement in US-China trade relations and continued efforts by major oil exporters to stabilise the market after a brutal end to last year.
Brent crude futures were trading up for their 10th consecutive day early Friday. If that holds up, it would be its best performance since the introduction of futures contracts in June 1988. This week’s performance has seen Brent rise 8.4%, its best weekly gains in over two years, as improved sentiment boosts the commodity’s performance.
For West Texas Intermediate, the US benchmark, oil has risen 24% since hitting a low on Christmas Eve.
“The macro drivers of prices has been the more dovish Federal Reserve and better news coming out of the US-China trade dispute,” Stephen Innes, the head of trading for Asia Pacific at the futures brokerage Oanda, said in an interview. “The market is reading between the lines that any deal would boost China’s economy and really improve demand.”
US trade representatives were in China for talks earlier this week, which raised hopes of a trade deal that would have a positive impact on oil prices.
Similarly, last December’s “OPEC+” summit in Vienna brought a round of supply cuts to the oil market, which are now finally being priced in amid a greater risk-on atmosphere. Despite that, prices are still about 30% lower than their October highs.
Saudi Arabia’s energy minister, Khalid Al-Falih, said that pledged reductions of 1.2 million barrels a day were “more than sufficient to balance the market.” Data out of Saudi Arabia supports the proposed ax in supply and demonstrated a cut in exports to the US with inventory figures also broadly positive.
Investor sentiment has also been boosted by comments from the Federal Reserve. Fed Chairman Jerome Powell has said the central bank will be cautious about pushing ahead with future interest-rate hikes after raising rates four times last year.
Brent crude was trading up 0.6% as of 8:55 a.m. in London (3:55 a.m. EST), while WTI was up 0.9%.
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