Oil rises one per cent on US, China trade talk optimism

14 January, 2019, 05:25 | Author: Brooke Harris
  • An oil refinery

Stocks have rallied this week, helped by promises of patience from the Federal Reserve, the European Central Bank mulling more cheap money, and progress in trade talks between Washington and Beijing.

ENERGY: Oil prices fell back after hitting their highest levels in nearly a month.

China plans to set a lower economic growth target of 6-6.5 percent in 2019 compared with last year's target of "around" 6.5 percent, policy sources told Reuters, as Beijing gears up to cope with higher us tariffs and weakening domestic demand. The tepid performance of both crude futures and energy stocks came as the USA government shutdown has been stretching for three weeks and showed no signs of ending.

A clutch of Fed officials said on Wednesday they will wait to deliver more interest rate hikes so the central bank can further assess growing risks to an otherwise solid US economic outlook.

Delegations from China and the US ended talks in Beijing on Wednesday amid signs of progress on issues including purchases of USA farm and energy commodities and increased access to China's markets.

"The financial markets had been pushing the Federal Reserve to change their tune", said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone. "Now we've got back to an equilibrium point". Futures for the S&P 500 index fell 0.1 percent to 2,591.60 and those for the Dow were flat at 23,949.00. Data on hedge fund wagers for West Texas Intermediate crude weren't available due to the USA government shutdown.

USA crude, which has jumped 15 percent in 2019, dropped 63 cents to USD$51.72 per barrel in electronic trading on the New York Mercantile Exchange.

At trading start on Thursday, oil prices were down around 1 percent as USA crude production endured at a record high level to keep a downward pressure on prices.

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Optimism that the trade standoff would be resolved also lifted oil prices.

However, a source in OPEC said the market was still covered with an air of uncertainty, meaning that many factors can still compel price to leap further or drop, even beyond expectation.

Oil prices were also supported by comments from US Federal Reserve Chairman Jerome Powell on Thursday that the central bank had the ability to be patient on monetary policy.

Gold prices rose on Wednesday, with spot gold XAU= rising 0.49 percent to $1,291.2 per ounce.

"There's a bit of profit-taking in stocks so that helped to rally Treasuries", said Larry Milstein, head of US government and agency trading at R.W. Pressprich & Co.in NY.

The dollar remained on the defensive after hitting its lowest level since mid-October amid signs Fed policymakers are becoming more cautious about future rate hikes and as investors unwound safe-haven bets due to optimism over the trade talks.

CURRENCIES: The dollar eased to 108.38 yen from 108.43 yen late Thursday.

In commodity markets, spot gold edged down to $1,292.70, but still not far off a near seven-month peak of $1.298,60 scaled on Friday.

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