Oil rose about one per cent overnight as progress on another major trade deal fed optimism that energy demand will grow in 2020.
The US Senate approved a revamp of the US-Mexico-Canada Free Trade Agreement a day after the signing of the Phase 1 trade deal between the United States and China.
Brent settled up 62 cents, or 1 per cent, to $US64.62 a barrel, while US West Texas Intermediate (WTI) crude rose by 71 US cents, or 1.2 per cent, to $US58.52 a barrel.
The deal that the Senate approved was a revamp of the 26-year-old North American Free Trade Agreement. A day earlier, US and Chinese leaders signed the Phase 1 trade deal calling for the world’s largest importer to buy $US50 billion more of US oil, liquefied natural gas and other energy products over two years.
However, analysts warned that China might struggle to meet the target and said oil prices could be volatile until more details emerge.
Trade sources said sharply higher Chinese purchases of US energy products as part of the China-US trade deal will shake up global crude oil trade flows if American supplies squeeze rival crudes out of the top oil import market.
“We had the US-China trade deal yesterday – signed and sealed. And now you got the US-Mexico trade going through the senate. So I think the optimism surrounding the demand is rising exponentially right now,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Flynn also cited a report from the Federal Reserve Bank of Philadelphia showing manufacturing activity in the US Mid-Atlantic region rebounded in January to its highest level in eight months.
Price gains were capped earlier as the International Energy Agency said it expected oil production to outpace demand for crude from the Organization of the Petroleum Exporting Countries, even if members comply fully with a pact with Russia and other non-OPEC allies to curb output..
The report also said surging oil production from non-OPEC countries led by the United States along with abundant global stocks will help the market weather political shocks such as the US-Iran stand-off.
UBS said in a note “provided Middle East tensions do not intensify and cause production disruptions, Brent should decline toward the bottom of a $US60-65 per barrel trading range in 1H20 before recovering to the top of it in the second half of the year”.