Oil steadies as IEA's forecast overshadows U.S.-China
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[January 16, 2020] By
Bozorgmehr Sharafedin and Aaron Sheldrick
LONDON/TOKYO (Reuters) - Oil steadied on
Thursday as the long-awaited Phase 1 trade deal between the United
States and China brought some relief to markets, but gains were capped
after the International Energy Agency said it expected oil production to
Brent <LCOc1> was up 11 cents at $64.11 a barrel by 1304 GMT, while U.S.
West Texas Intermediate (WTI) crude <CLc1> was down by 9 cents at $57.72
Under the so-called Phase 1 deal to call a truce in a trade war between
the world's two biggest economies, China committed to buy over $50
billion more of U.S. oil, liquefied natural gas and other energy
products over two years.
Trade sources and analysts said China could struggle to meet the target
and gains in oil are likely to be limited ahead of more detail on how
the commitments will be achieved.
"The interim deal has done the trick for the time being, but we can be
sure that as talks about Phase 2 get underway we shall see more twist
and turns," said oil broker PVM's Tamas Varga.
"To borrow the words from Ferdinand Foch, the Supreme Allied Commander
during WWI: 'This is not peace. It is an armistice for a few months'."
Oil prices are returning to range trading, analysts said, as the threat
of conflict between Iran and the U.S. receded further after they traded
missile and drone attacks earlier this month.
In a reassuring note to the market, the International Energy Agency (IEA)
said surging oil production from non-OPEC countries along with abundant
global stocks will help the market weather political shocks such as the
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The sun sets behind an oil pump outside Saint-Fiacre, near Paris,
France September 17, 2019. REUTERS/Christian Hartmann
The IEA also said it expected production to outstrip demand for crude from the
Organization of the Petroleum Exporting Countries (OPEC) even if members comply
fully with a pact with Russia and other non-OPEC allies to curb output.
(Graphic: OPEC and non-OPEC oil supply click,
UBS said in a note "provided Middle East tensions do not intensify and cause
production disruptions, Brent should decline toward the bottom of a $60–65 per
barrel trading range in 1H20 before recovering to the top of it in the second
half of the year".
Also supporting prices was U.S. official data that showed a much bigger than
expected drop in crude oil inventories.
Oil inventories fell by 2.5 million barrels, compared with analyst expectations
of a drop of 500,000 barrels, according to data from the Energy Information
Administration (EIA). [EIA/S]
(Reporting by Bozorgmehr Sharafedin in London and by Aaron Sheldrick in Tokyo;
editing by Emelia Sithole-Matarise, Kirsten Donovan)
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