New York — Crude futures settled higher Friday, following equities gains on some renewed global demand growth optimism.
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NYMEX front-month crude settled at $57.72/b, up 95 cents, while ICE front-month Brent settled $1.02 higher at $63.30/b.
Friday's rally followed a largely rangebound past couple of weeks. During November 1-14, NYMEX front-month crude has settled in a $1.04 range between $56.20/b and $57.24/b.
The market has been fixated on the US-China trade talks, as the December 15 deadline nears for a 15% tariff on roughly $160 billion of Chinese goods.
Equities jumped Friday on news US White House economic advisor Larry Kudlow said both countries are coming down to the final steps of finalizing the "Phase One" trade deal.
While analysts acknowledged the news was bullish for crude futures, they remained skeptical about the longer-term impacts.
"They've been telling us that for the past three weeks," said Gene McGillian, vice president of Tradition Energy.
McGillian said a slowdown in US oil drilling could also be lifting crude futures.
"There's no end in optimism" on the trade deal, said Ed Moya, senior market analyst at OANDA.
"We are not seeing any real change or any key breakthrough," he said, adding "the market is convinced that some deal will be done."
Economic indicators were far from bullish Friday, but not bearish enough to prevent equities from rising. US industrial production was down 0.8% in October, down from a drop of 0.3% in September, and a rise of 0.7% in August, the US Federal Reserve said Friday.
A General Motors strike pulled motor vehicle output lower in October, but even excluding motor vehicles, industrial production was 0.5% lower in the month.
Following the industrial production figures and Census data showing October retail sales (excluding automobiles) coming in below expectations at 0.2% growth, the Atlanta Federal Reserve lowered its Q4 GDP to just 0.3%.
Likewise, the New York Federal Reserve on Friday lowered its Q4 growth to 0.4%.
However, the St. Louis Fed was pegging Q4 growth at 1.5% Friday, and some analysts see economic and oil demand growth ahead.
S&P Global Platts Analytics said Friday it expects 2019 global GDP growth at 2.87%, and upgraded its 2020 growth forecast marginally to 3.14%.
"The critical factors are whether the current broad based recession being seen in manufacturing in many countries spills into non-recessionary sectors, such as services, and if domestic momentum in such countries gets derailed," Platts Analytics said in a report.
Bank of America Merrill Lynch analysts also saw oil growth ahead.
With 2019 year-on-year "consumption growth of just 830,000 b/d ... global oil demand has easily expanded at the lowest rate since the global financial crisis 10 years ago," the analysts said in a report Friday.
"Looking into 2020, we expect an improvement in cyclical demand conditions as manufacturing PMIs seem to have stabilized and in some cases appear to be turning positive," the analysts said. "This improvement is linked to the fact that finished goods inventories have come down to unsustainably low levels and need to be restocked" in H1 2020.
An interim US-China trade deal could "further boost industrial activity and confidence," they said.
REFINED PRODUCTS JUMP
Refined products were also higher Friday. NYMEX front-month ULSD settled 3.01 cents higher at $1.948/gal, while front-month RBOB settled 1.92 cents higher at $1.635/gal.
"We are seeing a little correction in diesel versus gasoline today," said Patricia Hemsworth, senior vice president at Paragon Global Markets.
"[P]eople were anticipating higher exports of non-compliant fuel, which could be helping RBOB," she said.
Starting January 1, a waiver is expiring for US refiners and importers to comply with 10 ppm sulfur gasoline.
US exports of gasoline have slowed this quarter, falling below year-ago levels since late September, US Energy Information Administration data shows. Exports at 775,000 b/d the week ending November 8 on a four-week moving average were down 79,000 b/d from the same period in 2018.
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