By Saket Sundria and Grant Smith
Oil has rebounded by about $7 since early October as fears of a potential global recession have receded, and on hopes for a breakthrough in the trade standoff. Yet, negotiations between Washington and Beijing have taken longer than expected, and concerns that surging U.S. supplies and constrained demand growth will unleash a new surplus have kept crude prices about 12% below this year’s peak.
“The first part of a trade war easing is yet to be agreed and has taken longer than expected, making markets fear that the deal would evaporate,” said Michael Poulsen, an analyst at Global Risk Management Ltd.
West Texas Intermediate for January delivery fell 23 cents to $58.35 a barrel on the New York Mercantile Exchange as of 8:49 a.m. local time, after settling at $58.58 on Thursday. Prices are heading for a third weekly increase, the longest run in seven months.
Brent for January settlement lost 9 cents to $63.88 a barrel on the London-based ICE Futures Europe Exchange, and is up 1% this week. The global benchmark crude traded at a $5.49 premium to WTI.
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There have been some signs of improvement in the oil market. Crude stockpiles at the U.S. storage hub in Cushing, Oklahoma fell last week by the most since August, according to government data on Wednesday.
Furthermore, supply risks in the Middle East have picked up again as political unrest flares in Iraq and Iran, two of the region’s biggest producers. The potential flashpoints add to other threats across members of the Organization of Petroleum Exporting Counties, including economic collapse in Venezuela and simmering discontent in Algeria.
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