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Crude futures settle higher on US-China trade prospects

New York — Crude oil futures ended higher Thursday, with sources saying that better prospects for a US-China trade deal added some bullish sentiment in the market.

ICE Brent January futures on Thursday settled at $62.29/b, 55 cents/b above Wednesday's settle, while the NYMEX December light sweet crude futures contract settled 80 cents/b higher at $57.15/b. NYMEX December RBOB settled up 93 points at $1.6355/gal and front month ULSD settled 75 points lower at $1.9203/gal.

"We're seeing some wind in the sails from the Chinese trade situation which over time will provide some sentiment around demand growth," said Gene McGillian, vice president of Tradition Energy.

All else being equal, improved trade relations between the US and China are seen as bullish for world economic growth, which in turn should support higher global oil demand.

"A new trade deal between the US and China is unlikely before the end of this year, but the latest headlines do suggest the long-term prospects are improving," said Geordie Wilkes, an analyst with Sucden UK.

China's Commerce Ministry said Thursday that China and the US would roll tariffs back on one another's goods incrementally as the two sides continue to negotiate towards a trade deal.

This announcement boosted crude futures in European trading after a somewhat subdued day of trading in Asia.

"Much like the equity and currency markets, oil has entered hibernation mode in Asia with both contracts unchanged in early trading. We expect this status quo to continue throughout the session," said Jeffrey Halley, senior market analyst at OANDA, who is based in Singapore. "There is not much to set the pulses racing in Asia today unless we get some more trade headlines."

NWE DIESEL HEADING TO USAC WEIGHING ON PRICES

Returns from planned work at European refineries are sending more barrels of ULSD across the Atlantic, as the US Atlantic Coast looks to replace output from the shuttered 335,000 b/d Philadelphia Energy Solutions refinery, exerting pressure on the price of ULSD in the New York Harbor.

Despite a 2.4 million barrel rise in total USAC ULSD inventories in the week that ended November 1, the Central Atlantic section of the USAC saw inventories drop to 13.2 million barrels from 14 million barrels a week earlier, Energy Information Administration data showed. This includes the Long Island section of New York which has the largest concentration of heating oil users in the US.

US CRUDE OUTPUT GROWTH SLIPPING

In other news, Plains All American Pipeline expects Permian Basin oil production growth to shrink to 800,000 b/d in 2019 and 500,000 b/d in 2020, trimming both annual estimates by about 100,000 b/d, as drillers focus on capital discipline, CEO Willie Chiang said earlier in the week.

Chiang said the slowdown could be more extreme toward late 2020, with growth falling by up to 400,000 b/d when compared with year-end 2019.

"It may prove [to be] conservative," Jeremy Goebel, executive vice president for commercial, told analysts on Plains' third-quarter earnings call, adding the 2020 figure was based on 375 rigs continuing to operate through next year.

--Janet McGurty, janet.mcgurty@spglobal.com

--Edited by Debiprasad Nayak, debiprasad.nayak@spglobal.com