Oil prices were set for a third straight weekly gain despite a Friday fall after easing US-China trade tensions lifted business confidence and the outlook for global economic growth. Brent LCOc1 was down 17 cents at $66.37 a barrel by 1311 GMT, equivalent to a weekly rise of around 1.8%, while U.S. West Texas Intermediate crude CLc1 was down 20 cents at $60.98 per barrel, a gain of around 1.5% on the week. Volume of oil trade remained thin in the pre-Christmas wind down.
Progress in the trade dispute between the world’s two biggest oil consumers has raised expectations of higher energy demand next year. China on Thursday announced a list of import tariff exemptions for six oil and chemical products from the United States, days after Washington and Beijing said an interim trade deal is set to be signed in January. Most major economies have likely averted recession for now but growth will remain subdued in 2020, polls forecast.
The energy sector as a whole looks set to end 2019 with a solid year-on-year gain. This is due solely to the oil market, Barbara Lambrecht, an analyst at Commerzbank, said. Brent is 23% more expensive than it was at the start of the year. Oil prices fell almost 20% in 2018. UBS lifted its oil price forecast for 2020 but also expects the oil market to be oversupplied by 0.3 million barrels per day next year.
Our end-of-quarter Brent price forecasts are $60 per barrel for 1Q20 and $62 per barrel, $64 per barrel, and $64 per barrel for the following three quarters,” UBS analysts Giovanni Staunovo and Dominic Schnider said in a note. UBS’s previous forecast for the four quarters of 2020 was $58, $55, $58, $60 per barrel respectively.
A U.S. weekly drilling report by energy services firm Baker Hughes is due on Friday. Analysts say an expected fall in U.S. drilling activity should support oil prices. Investors also await U.S. gross domestic product data due out later on Friday. Meanwhile, Oil sector workers of France’s CGT union could decide on Friday whether to halt production at oil refineries in France in order to scale up their protest at the government’s planned overhaul of pensions.