Oil prices rallied to start the week on Monday, as traders again shook off concerns about a U.S.-China trade war, at least for now.
Attention now turns to China’s Boao Forum – the so-called Asian Davos – where Chinese President Xi Jinping will make a much-anticipated speech on Tuesday, which traders are watching for any reference to the trade dispute with the U.S.
The U.S. and China are the world’s two largest oil consuming nations.
U.S. West Texas Intermediate crude futures jumped $1.03, or 1.7%, to $63.08 a barrel by 10:10AM ET (1410GMT). The U.S. benchmark lost about 4.4% last week, its biggest such decline since the week ended Feb. 9.
Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., gained $1.04, or roughly 1.5%, to $68.15 a barrel. Brent saw a weekly fall of 4.5%, its biggest since the week ended March 2.
Oil prices finished lower on Friday to tally their worst weekly loss in two months as investors fled riskier assets amid fears that deteriorating trade relations between the U.S. and China could deal a blow to global growth.
Sentiment took another hit after General Electric’s Baker Hughes energy services firm said in its closely followed report on Friday that the number of oil drilling rigs rose by 10 to 808 last week.
That was the highest number since March 2015, underscoring worries about rising U.S. output.
Domestic oil production – driven by shale extraction – rose to an all-time high of 10.46 million bpd last week, the Energy Information Administration (EIA) said, staying above Saudi Arabia’s output levels and within reach of Russia, the world’s biggest crude producer.
Analysts and traders have recently warned that booming U.S. shale oil production could potentially derail OPEC’s effort to end a supply glut.
OPEC and other producers, including Russia, agreed to cut output by about 1.8 million barrels per day (bpd) in November last year to slash global inventories to the five year-average. The arrangement is set to expire at the end of 2018.
In the week ahead, oil traders will await fresh data on U.S. commercial crude inventories on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.
Market players will also focus on monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency on Thursday and Friday to assess global oil supply and demand levels.
Comments from global oil producers for additional signals on whether they plan to extend their current production-cut agreement into next year will also remain on the forefront.