Oil prices edged up on Tuesday, supported by hopes that U.S.-Chinese talks in Beijing would bring a halt to a trade dispute between the world’s biggest economies, while the start of OPEC-led supply cuts also tightened markets. U.S. West Texas Intermediate (WTI) crude oil futures were at $48.69 per barrel at 0024 GMT, up 17 cents, or 0.4 percent from their last settlement. International Brent crude futures had yet to trade.
U.S. Commerce Secretary Wilbur Ross said late on Monday that Beijing and Washington could reach a trade deal that “we can live with” as dozens of officials from the world’s two largest economies held talks in a bid to end their trade dispute that has roiled global markets since last year.
Despite optimism around the talks in Beijing, some analysts warned that the relationship between Washington and Beijing remained on shaky grounds, and that tensions could flare up again soon. “We remain concerned about the world’s most important bilateral relationship,” political risk consultancy Eurasia Group said in its 2019 outlook.
“The U.S. political establishment believes engagement with Beijing is no longer working, and it’s embracing an openly confrontational approach … (and) rising nationalist sentiment makes it unlikely that Beijing will ignore U.S. provocations,” Eurasia Group said. Beyond politics, oil markets are being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.
“Crude oil prices have benefited from OPEC production cuts and steadying equities markets,” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities. Looming over the OPEC-led cuts, however, is a surge in U.S. oil supply, driven by a steep rise in onshore shale oil drilling and production. As a result, U.S. crude oil production <C-OUT-T-EIA> rose by a whopping 2 million barrels per day (bpd) last year to a world record 11.7 million bpd. With drilling activity still high, most analysts expect U.S. oil production to rise further this year.