(Bloomberg) -- Oil surged the most in more than two months amid growing optimism for a U.S.-China trade deal and as OPEC and its allies prepared to discuss extending or possibly deepening output limits.
Futures in New York gained 4.2%, the most since missile attacks on Saudi Arabian oil installations in September. The U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal, people familiar with the talks said. That revived hopes for a quick end to the demand-killing dispute that has dragged on for over a year.
“U.S.-China deal trade hopes contributed to today’s rally,” said Timothy Evans, energy futures specialist for Citi Futures.
From here, the market will to look to this week’s much-awaited meetings among OPEC and its allies on its supply policy. “We’ll have to wait until at least tomorrow to learn the actual policy decision,” Evans said.
Earlier, in pre-meeting discussions Wednesday, Iraq backed away from an initial proposal to deepen existing production cuts for OPEC and its allies to manage slowing demand. The news caused a brief retreat in prices.
West Texas Intermediate for January delivery rose $2.33 to settle at $58.43 a barrel on the New York Mercantile Exchange. Brent for February settlement advanced $2.18 to $63 on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $4.66 premium to WTI for the same month.
Weekly U.S. inventory data added to the bullish tone, as the Energy Information Administration reported a 4.86-million barrel draw in U.S. crude stocks, more than what the market expected. That, along with a sharp increase in crude demand from refiners, offset growing gasoline and distillate inventories.
“The market seems to have taken that as the more significant surprise than the builds in product stocks,” Evans said. Last week’s crude stock decline was the first in six weeks, and occurred largely in the critical Gulf Coast refining belt.
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