Oil nears three-month high as trade hopes, UK election boost sentiment

NEW YORK (Reuters) - Oil rose on Friday to its highest in nearly three months as investors cheered progress in resolving the U.S.-China trade dispute and a decisive general election result in Britain.

FILE PHOTO: Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. Picture taken August 21, 2019. REUTERS/Jessica Lutz

Washington and Beijing announced a “Phase one” agreement that reduces some U.S. tariffs in exchange for increased Chinese purchases of American farm goods.

Brent LCOc1 futures, the global benchmark, gained $1.02, or 1.6%, to settle at $65.22 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 89 cents, or 1.5%, to $60.07.

Both contracts settled at their highest since Sept. 16, up a little over 1% for the week.

China has agreed to buy $32 billion of additional U.S. farm products over two years as part of a phase one trade pact, U.S. Trade Representative Robert Lighthizer told reporters on Friday, adding the deal would be signed the first week of January.

Chinese officials, however, offered no specifics on the amount of U.S. agricultural goods Beijing agreed to buy, a sticking point in negotiations to end the 17-month trade war between the world’s two largest economies.

“It looks like President Donald Trump got his trade deal just in time for Christmas,” said Phil Flynn, an analyst at Price Futures Group in Chicago. He said that while “markets jumped” on the trade news, he would like to see more details from the Chinese.

Britain’s ruling Conservative Party won a large majority in Thursday’s general election, paving the way for Prime Minister Boris Johnson to remove the country from the European Union. Uncertainty about Brexit had also weighed on oil prices.

“With a large win for Boris Johnson in the UK general election and an ‘almost there’ for the U.S.-China trade war, it’s up we go for Brent crude,” said Bjarne Schieldrop, an analyst at SEB.

“Oil demand growth will likely rebound along with a rebound in global manufacturing.”

A drop in the U.S. dollar .DXY coupled with a strong pound also helped boost commodities.

“Risk appetite among financial investors is now likely to remain high thanks to the deal between the U.S. and China and the forthcoming end to the Brexit cliffhanger,” said Eugen Weinberg, an analyst at Commerzbank. “This will also benefit the oil price.”

U.S. retail sales rose less than expected in November as Americans cut discretionary spending.

Brent has rallied 21 percent in 2019, supported by efforts by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to cut production.

The alliance, known as OPEC+, agreed last week to lower supply a further 500,000 barrels per day as of Jan. 1.

Oil prices did not move much when a U.S. House of Representatives committee took Trump to the brink of impeachment, approving two charges stemming from his efforts to pressure Ukraine to investigate Democratic political rival Joe Biden.

Additional reporting by Alex Lawler in London and Roslan Khasawneh in Singapore; editing by Mike Harrison, Elaine Hardcastle and David Gregorio