Mubasher: Oil prices were on course for strong weekly gains on Friday as financial markets rallied on hopes that the US and China could soon put their trade dispute to an end.
Production cuts announced by a producer group led by the Organization of Petroleum Exporting Countries (OPEC) started also to tighten supply.
However, markets were held in check by expectations of an economic slowdown this year.
By 8:18 am GMT, global benchmark Brent futures rose 0.62% to $62.06 per barrel (pb), while US Nymex crude futures climbed 0.86% to $53.04 pb.
Both contracts are projected to post their second week of gains, with Brent rising around 8% and Nymex climbing 10%.
Markets were supported by hopes that the trade war between the world’s two largest economies may come to an end soon, after a constructive conclusion of thee-day trade talks in Beijing, as described by officials who expects more discussions to follow this month.
Moreover, shortage in crude exports from Iran since last November, after the US sanctions against Tehran came into effect, offered support to oil markets.
That said, worries over the health of the global economy lingered on, amid further indication that Chinese economic growth last year and this year would be the lowest since 1990.
“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” Sydney-based Frame Funds portfolio manager Hue Frame told Thomson Reuters.
On the supply front, crude prices were buoyed by OPEC-led supply curbs which aimed to clear a market glut which emerged in the second of last year.
The glut was fuelled by supplies from the US where production surged by more than 2 million barrels per day (bpd) last year, hitting a record 11.7 million bpd.
Looking at the overall supply and demand balance, Swiss lender Julius Baer was “price neutral” in its oil forecast.
“We see the oil market as well balanced into the foreseeable future, as the petro-nations make space for further US shale production growth,” the bank’s commodity research head Norbert Ruecker told Rueters.