Oil in New York headed for its biggest annual increase since 2016, as OPEC’s production cuts tempered supplies while a trade pact between the U.S. and China buoyed the outlook for demand.
West Texas Intermediate futures have climbed 36% this year, and were trading above $61 a barrel on Tuesday. Prices have picked up in the past few months as OPEC and its allies agreed to deepen the output cutbacks they’ve made this year, while Washington and Beijing cooled a tariff battle that had weighed on financial markets for much of 2019.
“The U.S.-China trade war was in the driver’s seat when we entered 2019 and remains there as we exit the year,” said Vandana Hari, founder of industry consultant Vanda Insights in Singapore.
Oil markets have faced a tumultuous year, with much of WTI’s gains coming in its first few weeks. Prices saw their steepest one-day loss in four years on Aug. 1 after President Donald Trump threatened to impose more tariffs on China, then soared the most in more than a decade in September when key oil facilities in Saudi Arabia were disabled in a missile attack.
Mideast tensions have flared again this week. The U.S. launched air strikes on five bases in Iraq and Syria used by an Iranian-backed militia as a warning to Tehran over its aggressive moves in the region, the State Department said.
The attack heightened concerns of destabilization in Iraq, OPEC’s second-biggest producer, where the U.S. evacuated essential staff from its embassy in Baghdad on Tuesday following protests, according to Sky News. Iran, which the U.S. blamed for September’s strike on Saudi Arabia and earlier attacks on oil tankers, said it detained a ship carrying smuggled fuel near the Strait of Hormuz.
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WTI for February delivery was little changed at $61.63 a barrel on the New York Mercantile Exchange as of 10:18 a.m. London time. Prices have advanced by about $16 a barrel this year.
Brent for March settlement rose 9 cents to $66.76 a barrel on London’s ICE Futures Europe exchange. Front-month prices are up about 24% this year, also set for the biggest annual gain since 2016. The global benchmark crude was trading at a $6.78 premium to WTI for the same month on Tuesday.
In 2020, oil prices are likely to remain in check as OPEC+ production cuts are offset by higher output from other countries and a mixed outlook for demand, analyst forecasts show. Nevertheless, prices are seen climbing in the middle of the year amid stronger emerging-market consumption.
