NEW YORK (Reuters) – Oil prices were steady on Friday but were on track for the strongest weekly gains in more than a month as support from falling U.S. crude inventories, optimism over a U.S.-China trade deal and possible action from OPEC and its allies to extend output cuts outweighed broader economic concerns.
FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S. February 11, 2019. REUTERS/Nick Oxford
Brent crude LCOc1 was down 2 cents at $61.65 by 12:17 p.m. EDT (1617 GMT) but the global benchmark was set for a weekly gain of almost 4%. West Texas Intermediate (WTI) crude CLc1 was up 16 cents at $56.39 and on track for a gain of nearly 5% over the week.
The strong weekly performance was underpinned by the surprise drop in U.S. inventories, with crude stocks dropping by about 1.7 million barrels last week.
GRAPHIC: U.S. petroleum inventorie – here
“We’re holding our ground after a pretty good up week with the surprise draw in inventories this week,” said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.
Oil also got a boost this week from signs of progress in talks on resolving the U.S.-China trade dispute that has weighed on crude demand. CNBC reported on Friday that the United States and China were close to finalizing the first part of a trade deal after months of a tariff war.
“That’s given us optimism in the crude market that there’s going to be some pretty strong demand,” Flynn said.
Yet concerns over weakening economic growth continued to drag on prices.
“Slowing global activity will see demand drop, so the reality is that oil rallies will be limited,” said Jeffrey Halley, senior market analyst at OANDA.
“It won’t take much too pull the rug out from under oil’s feet.”
Economists in a Reuters poll said a steeper decline in global economic growth remains more likely than a synchronized recovery, even as multiple central banks dole out rounds of monetary easing.
GRAPHIC: Reuters Poll on growth forecast revisions from July survey – here
Another Reuters poll of economists found the recent truce in the U.S.-China trade war is not an economic turning point and has done nothing to reduce the risk that the United States could slip into recession in the next two years.
Also providing further price support this week, officials at the Organization of the Petroleum Exporting Countries said extended supply curbs are an option to offset the weaker demand outlook in 2020.
Saudi Arabia, OPEC’s de facto leader, wants to focus first on boosting adherence to the group’s production-reduction pact with Russia and other non-members, an alliance known as OPEC+, before committing to more cuts, sources told Reuters. The alliance in July renewed the pact to cut output by 1.2 million barrels per day since Jan. 1, until March 2020.
A shutdown since Oct. 16 of Britain’s 150,000 bpd Buzzard oilfield and a brief shutdown in the North Sea’s Forties Pipeline System also lent support. Sources told Reuters that Buzzard would restart over the weekend.
Data about the U.S. oil rig count, an indicator of future supply, is expected at 1 p.m. EDT.
Additional reporting by Ahmad Ghaddar in LONDON and Aaron Sheldrick in TOKYO; Editing by Marguerita Choy and David Evans