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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower on Friday, shortly before the regular session opening. The move is likely being driven by position-squaring ahead of the weekend and profit-taking after posting a nearly 7% gain from Wednesday to Thursday.

Some traders are blaming lingering doubts on whether the United States and China will be able to reach a partial trade deal that would lift some pressure on the global economy. Nonetheless, there appears to be enough bullishness left from reports that OPEC and its allies will extend its production cuts to offset the negative news.

At 11:04 GMT, January WTI crude oil is trading $58.29, down $0.29 or -0.50%. January Brent crude is at $63.84, down $0.13 or -0.20%.

US – China Recap

Risk sentiment has seesawed all week amid mixed signals on whether Washington and Beijing can work out at least a partial deal to end trade-related tensions between the world’s two largest economies.

Earlier in the week, President Trump said the United States would raise tariffs on Chinese imports if no deal is reached with Beijing to end the trade war.

On Thursday after a report in the South China Morning Post said the United States could delay tariffs on Chinese imports even if a deal has not been reached by December 15, when tariffs kick in on goods including electronics and Christmas decorations.

Separately, Chinese Vice Premier Liu He, also the chief trade negotiator, said he was “cautiously optimistic” on a phase one deal, according to a report by Bloomberg.

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U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA reported U.S. crude stocks rose by 1.4 million barrels in the week to November 15, compared with expectations for an increase of 1.5 million barrels. It was also significantly lower than the 6 million barrel gain that the American Petroleum Institute (API) data showed late Tuesday.

Crude stocks at the U.S. futures delivery hub of Cushing, Oklahoma fell by 2.3 million barrels. The EIA also reported a 1.9-million barrel build in gasoline inventories for the week before, and a decline of 2.5 million barrels in distillate fuel inventories.

Additionally, the EIA said refineries last week produced 10.1 million bpd of gasoline, down from 10.2 million bpd a week earlier. Distillate fuel production averaged 5.1 million bpd, compared with 5 million bpd a week earlier. The average crude oil processing rate last week was 16.4 million bpd, compared with 15.9 million bpd a week earlier.

Daily Forecast

Unless there is a major break-through in the trade deal negotiations, good or bad, crude oil prices are likely to be largely supported by the news that OPEC and its allies likely to agree to maintain its production cuts when it meets on December 5-6.

Crude oil futures surged more than 2% on Thursday following a Reuters report that OPEC and its allies are likely to extend output cuts until mid-2020. There was no mention of whether they would deepen the cuts in production. Nonetheless, the price action clearly indicates that traders liked the news.

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