(Bloomberg) — Oil climbed as the U.S. and China were said to near a deal on trade that would underpin the outlook for crude demand, while supplies around the world showed signs of tightening.
Futures in New York rose as much as 1 percent after a drop of 2.6 percent last week. The world’s two biggest economies are approaching an accord that could lift most or all U.S. tariffs, according to people familiar with the discussions. Working oil rigs in America fell to the least since May, according to data from Baker Hughes. OPEC’s output dropped last month, aided by unplanned supply losses in Iran and Venezuela.
Oil’s rallied about 24 percent this year as the Organization of the Petroleum Exporting Countries and allies started to cut production while American sanctions on Venezuela and Iran restricted supplies further.
“Growing compliance with the OPEC+ deal and slowing rig count in the U.S. should remain fairly supportive for the oil market,” said Warren Patterson, senior commodities strategist at ING Bank NV.
West Texas Intermediate for April delivery rose as much as 57 cents to $56.37 a barrel on the New York Mercantile Exchange and traded 54 cents higher at 10:32 a.m. in London. Prices fell last week following weaker-than-expected reports on U.S. factory orders and consumer sentiment.
Brent for May settlement was at $65.88 a barrel, up 81 cents, on the London-based ICE Futures Europe exchange. The global benchmark crude’s premium over WTI for the same month widened to $9.10.
The drop in American oil rigs, by 10 to 843 last week, came as explorers were chastened by a near 40 percent collapse in prices late last year. In the Permian, the nation’s largest shale play, rigs fell by seven to 466, also the lowest since May.
Nabors Industries Ltd., the world’s largest owner of land drilling rigs, said customers accounting for more than a third of the machines deployed across the U.S. plan to trim activity by about 3 percent this year.
OPEC’s production slumped as key cartel members Saudi Arabia, Kuwait and the United Arab Emirates delivered all — and in some cases more — of cuts they had pledged to make under a deal between the group and its allies. Russia produced the equivalent of 11.336 million barrels a day last month, down 82,000 barrels per day from the October baseline of the producer alliance known as OPEC+, Bloomberg calculations show.
Substantial progress has been made in the talks with the U.S., a spokesman for China’s National People’s Congress said before legislative meetings this week. People familiar with the discussions earlier said a deal is likely as long as Beijing sticks to pledges ranging from protecting intellectual-property to buying U.S. products.
“There continues to be very strong support for oil prices on the back of OPEC reducing their production,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. “Also, if the U.S. and China manage to resolve their key differences, then we can raise the oil demand a few notches. I think there is hope.”
–With assistance from Tsuyoshi Inajima.To contact the reporters on this story: Saket Sundria in Singapore at firstname.lastname@example.org ;Grant Smith in London at email@example.com To contact the editors responsible for this story: James Herron at firstname.lastname@example.org Christopher Sell, Rakteem Katakey