Oil near six-week low as ample supply offsets trade hopes

Oil traded near its lowest closing level in six weeks as cautious hopes that the US-China trade pact will support demand were offset by signs of ample supply.

Futures held near $58 a barrel on Thursday after settling the previous day at the lowest since December 3.

While the deal between Washington and Beijing promises increased Chinese purchases of American energy, and defuses some of the tensions that weighed on global markets last year, US government data showed that combined inventories of crude and refined products rose to their highest since September.

West Texas Intermediate crude for February delivery rose 6 cents, or 0.1 per cent, to $57.87 a barrel on the New York Mercantile Exchange as of 11.04am in London. The contract fell 0.7 per cent to close at $57.81 on Wednesday.

Brent for March settlement climbed 0.4 per cent to $64.27 a barrel on the ICE Futures Europe exchange after closing down 0.8 per cent on Wednesday.

The global benchmark crude traded at a $6.33 premium to WTI for the same month.

China pledged $52.4bn of further purchases of American energy over 2020 and 2021, although it didn’t say whether it would lift a retaliatory 5 per cent tariff on US crude.

It would need to accelerate imports of US oil to fulfill the pledge, which official data show peaked at 14.7 million barrels in January 2018, to 21.9 million barrels a month this year, and 36.2 million barrels in 2021.

“It remains to be seen whether the deal will actually be implemented as agreed,” Eugen Weinberg, head of commodities research at Commerzbank AG, said.