Oil steady on trade pact optimism, stock draw; eyes on MidEast

By Seng Li Peng
SINGAPORE, Dec 30 (Reuters) - Oil prices hovered around
three-month highs on Monday following a higher-than-expected
crude inventory drawdown and optimism over an expected U.S-China
trade deal, while traders kept a close eye on Middle East
unrest.
Markets showed little immediate reaction to news of U.S. air
strikes in Iraq and Syria against an Iran-backed militia group,
even as U.S. officials warned "additional actions" may be taken.
West Texas Intermediate (WTI) crude futures CLc1 edged up
1 cent to $61.73 a barrel by 0210 GMT. The U.S. benchmark is up
about 36% so far this year.
Brent crude futures LCOc1 were at $68.28 a barrel, up 12
cents. The international benchmark has risen around 27% in 2019.
"There are a couple of catalysts driving up the crude oil
prices recently: trade optimism, a large drop in U.S. commercial
stockpiles, a plunge in USD and air strikes," said market
analyst Margaret Yang of CMC Markets.
China's Commerce Ministry said on Sunday that it is in close
touch with the United States on the signing of a long-awaited
trade deal. The two countries on Dec. 13 announced a "Phase one"
agreement that reduces some U.S. tariffs in exchange for what
U.S. officials said would be a big jump in Chinese purchases of
American farm products and other goods. Oil prices were also supported by a bigger than expected
fall in U.S. crude stocks. U.S. stockpiles fell by 5.5 million
barrels in the week to Dec. 20, far exceeding a
1.7-million-barrel drop forecast in a Reuters poll. In the Middle East, protesters on Saturday forced the
closure of Iraq's southern Nassiriya oilfield, while United
States carried out air strikes on Sunday in Iraq and Syria
against the Kataib Hezbollah militia group. "Traders are keeping an eye on the smoldering powder keg in
Iraq, OPEC's second large producer," said Stephen Innes chief
Asia market strategist at AxiTrader.
U.S. officials said the air strikes in response to the
killing of a U.S. civilian contractor in a rocket attack on an
Iraqi military base were successful, but warned that "additional
actions" may still be taken.
Iraq's oil ministry said the production halt at the
Nassiriya oilfield will not affect the country's exports and
production operations as it will use additional output from
southern oilfields in Basra. Mass protests have gripped Iraq since Oct. 1. Elsewhere, Libyan state oil firm NOC said it is considering
the closure of its western Zawiya port and evacuating staff from
the refinery located there due to clashes nearby.