Oil edged higher to settle at a three-month high on optimism that a partial trade deal between the world’s two largest economies will spur demand for fuel to power trucks, trains, airplanes and cars.
Futures closed above the $60-a-barrel mark for a second straight session Monday in New York. Bullish bets rose the most in three years in the days leading up to Friday’s announcement that China will buy more American farm products. The deal is expected to be signed and released publicly in early January.
“Investors are still feeding off the news of the preliminary deal between U.S. and China,” said Michael Loewen, director of commodity strategy at Scotiabank in Toronto. The market also drew confidence from U.S. manufacturing and services data released earlier highlighting an already strong economy, Loewen added.
Although many of the tariffs imposed during the 20-month dispute will remain in place, the initial accord signals a thaw in U.S.-China relations. The optimism comes after deeper-than-expected production cuts announced earlier this month by OPEC and its partners.
WTI for January delivery rose 14 cents to settle at $60.21 a barrel on the New York Mercantile Exchange. The contract has gained about 9% this month.
Brent for February settlement was up 12 cents at $65.34 on the London-based ICE Futures Europe Exchange. The contract advanced almost 5% this month. The global benchmark was at a $5.20 premium to WTI for the same month.
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