Oil prices hovered near the highest in three months in thin pre-Christmas trading on Thursday, buoyed by the previous day's news that U.S. crude inventories declined and as U.S.-China trade tensions continued to ease.
Trading volume was thin, with oil headed for a third consecutive weekly rise. Prices were buoyed by China's Dec. 13 decision to cancel a plan to impose additional tariffs on U.S. imports on Dec. 15 and the Phase 1 deal between Washington and China, which has eased trade tensions.
The deal between the world's two largest economies has improved the global economic outlook, lifting prospects for higher energy demand next year and underpinning oil prices.
"The market's happy with (Dec. 15) tariffs out of the way and the trade truce, for now," said Bill Baruch, president at Blue Line Futures in Chicago.
In a further sign of thawing relations, China's finance ministry on Thursday published a new list of six U.S. products that will be exempt from tariffs starting Dec. 26.
Oil has also gained momentum from announcements about deeper output cuts by major crude producers. The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia agreed earlier this month to deepen production cuts by a further 500,000 barrels per day (bpd) from Jan. 1 on top of previous reductions of 1.2 million bpd.
Adding to the positive mood, weekly data from the Energy Information Administration showed U.S. crude inventories dropped 1.1 million barrels in the week to Dec. 13, while gasoline and distillates stockpiles rose.
News of President Donald Trump's impeachment by the U.S. House of Representatives failed to stir the oil market.
"A resilient performance in the coming two weeks will flip the monthly technical picture unreservedly positive for next year," PVM oil market analysts said, although they said prices were still likely to be volatile.