Crude oil futures rise on optimism after US-China Phase 1 trade deal

Crude oil futures were higher in mid-morning trade in Asia Thursday as optimism emerged after the US and China signed Phase 1 of the trade agreement.

At 11:08 am Singapore time (0308 GMT), front-month March ICE Brent crude futures were up 45 cents/b (0.70%) from Wednesday's settle at $64.45/b, while the NYMEX February light sweet crude contract was up 40 cents/b (0.69%) at $58.21/b.

The overall sentiment in Asian markets ticked up Thursday morning after the deal was signed Wednesday. Under the deal, China will purchase $50 billion worth of US energy products over the next two years.

"The 'Phase-1' deal has been inked, and the most positive aspect of the deal is that this materially diminishes uncertainty around US-China trade relations in the short-term," Mizuho Bank's senior economist Vishnu Varathan said.

"But this is a tentative truce and not a clean slate; and far from a lasting resolution," he added.

Nonetheless, sentiment has been volatile for crude futures as market drivers remain mixed, while expectations of delays in tariff cuts remained a dampener, analysts said.

"While market would obviously take to the deal positively, it would likely be one of relief rather than elation... the positive reaction is likely muted by earlier announcement that US will not cut remaining tariffs," OCBC analysts said in a note Thursday.

Existing tariffs on Chinese exports to the US are likely to stay in place until after the US presidential election in November, according to earlier media reports.

US Energy Information Administration data also showed record high domestic production and large refined product builds last week, putting downward pressure on settled prices Wednesday.

US crude production ticked up 100,000 b/d to a fresh all-time high of 13 million b/d in the week ended January 10, EIA data showed Wednesday.

A surge in US refined product stocks also added to bearish sentiment.

As of 0308 GMT, the US Dollar Index was up 0.04% at 96.96.