Oil edges up on trade optimism, eyes on Middle East tensions

Reuters Singapore Dec 30, 2019, 11.14 AM(IST)

Both crude benchmarks are up by almost 60 percent since the middle of last year. Photograph:( Others )

Story highlights

Markets showed a little initial reaction to news of the US strikes in Iraq and Syria against an Iran-backed militia group, even as US officials warned "additional actions" may be taken

Oil prices traded at three-month highs on Monday, underpinned by optimism over an expected US-China trade deal, while traders kept a close eye on the Middle East following a US airstrike.

Markets showed little initial reaction to news of the US strikes in Iraq and Syria against an Iran-backed militia group, even as US officials warned "additional actions" may be taken.

West Texas Intermediate (WTI) crude futures edged up 5 cents to $61.77 a barrel by 0529 GMT. The US benchmark is up about 36 per cent so far this year.

Brent crude futures were at $68.36 a barrel, up 20 cents, or 0.3 per cent. The international benchmark has risen around 27 per cent in 2019.

"(Trading) has been relatively flat due to lack of market participants in the holiday season," said market analyst Margaret Yang of CMC Markets.

"Oil prices have reached their highest level since the Saudi oil field attack in Mid Sep, and thus traders are also cautious about profit-taking possibilities," she added.

On Sunday, China's Commerce Ministry said it is in close touch with the United States on the signing of a long-awaited trade deal.

The two countries on December 13 announced a "Phase one" agreement that reduces some US tariffs in exchange for what US officials said would be a big jump in Chinese purchases of American farm products and other goods.

Oil prices were also supported by declining US crude stocks which fell by 5.5 million barrels in the week to December 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters poll.

In the Middle East, the United States carried out air strikes on Sunday in Iraq and Syria against the Kataib Hezbollah militia group, while protesters in Iraq on Saturday forced the closure of its southern Nassiriya oilfield.

US officials said the air strikes in response to the killing of a US civilian contractor in a rocket attack on an Iraqi military base were successful but warned that "additional actions" may still be taken.

Iraq's oil ministry said the production halt at the Nassiriya oilfield will not affect the country's exports as it will use the additional output from southern oilfields in Basra.

Elsewhere, Libyan state oil firm NOC said it is considering the closure of its western Zawiya port and evacuating staff from the refinery located there due to clashes nearby.

However, the holiday season meant "oil will continue to struggle for meaningful moves," said Edward Moya, analyst at brokerage OANDA.