Oil holds steady near three-month highs on trade deal optimism

A drop in US crude inventories and Opec-led output cuts are also expected to support prices into next year

US crude oil stockpiles fell by 1.1 million barrels to 446.8 million barrels in the week to December 13, the Energy Information Administration (EIA) said this week. Photo: Reuters

Oil prices held steady near three-month highs on Friday, heading for a third consecutive weekly rise on the back of easing US-China trade tensions that have weighed on demand as well as the global economic growth outlook.

Brent futures were up 5 cents, or 0.08 per cent, to $66.59 a barrel by 2:42am GMT, while US West Texas Intermediate crude was down 8 cents, or 0.13 per cent, at $61.10 per barrel.

Progress in a long-running trade dispute between the US and China, the world's two biggest oil consumers, has boosted expectations for higher energy demand next year.

China on Thursday announced a list of import tariff exemptions for six oil and chemical products from the US, days after the world's two largest economies announced an interim trade deal set to be signed at the beginning of January.

"A world with less uncertainty [following last week's proposed US-China trade agreement] was the real driver of the market optimism on the 2020 outlook," ANZ Research said in a note.

JP Morgan and Goldman Sachs raised its 2020 oil price outlook earlier this week amid Opec-led output cuts and an improved global trade outlook.

The Organisation of Petroleum Exporting Countries (Opec) and its allies including Russia agreed in early December to make a further cut of 500,000 barrels per day (bpd) from January 1 on top of previous reductions of 1.2 million bpd.

The trade deal progress aside, a drop in US crude inventories also supported oil prices to hold near three-month highs.

"Crude prices continued their stellar performance into year-end, nudged along by the more benevolent inventory data published by the EIA," said Stephen Innes, market strategist at AxiTrader.

"Product demand is up, and with a more constructive global growth outlook than at any time of this year, oil markets remain supported by the fundamental backdrop," Mr Innes added.

US crude oil stockpiles fell by 1.1 million barrels to 446.8 million barrels in the week to December 13, the Energy Information Administration (EIA) said on Wednesday.

ANZ Research also said "an expected fall in US drilling activity should support oil prices".