Oil rose on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown, but gains were capped after the United States reported a sharp build in refined product inventories.
Brent crude, the global benchmark, rose $1.11, or 2 percent, to $57.06 a barrel. ET. U.S. crude oil ended Friday’s session up 87 cents, or 1.9 percent, at $47.96.
After both benchmarks fell sharply last year, prices were on track for solid gains in the first week of 2019, despite recent data that added to concerns about a slowing global economy.
Brent increased about 9 percent for the week, while WTI rose by nearly 6 percent.
Prices pared gains on Friday after data from the U.S. Energy Information Administration showed a sharp increase in product inventories as refiners ramped up utilization rates to 97.2 percent of capacity, the highest rate on record for this time of year.
Gasoline stocks rose 6.9 million barrels last week, while distillate stockpiles grew 9.5 million barrels, the EIA said, compared with forecasts for builds under 2 million barrels. U.S. crude stockpiles were little changed.
“The big build in products has really caught everyone by surprise again,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “The gasoline number was a little bit disappointing because demand was soft and we saw a big build in supply.”
U.S. energy firms cut oil rigs for the first time in three weeks as producers started to reduce their 2019 drilling plans with the collapse in crude prices at the end of last year. Drillers cut eight oil rigs in the week to Jan. 4, bringing the total count down to 877, General Electric’s Baker Hughes energy services firm said in its closely followed report on Friday.
Oil drew support from comments by China’s commerce ministry, which said Beijing would hold vice-ministerial trade talks with U.S. counterparts on Jan. 7-8. The news helped boost sentiment across riskier assets including the U.S. equity and oil markets.
Washington and Beijing have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and hampering growth.
China’s services sector extended its expansion in December, a private survey showed on Friday, bucking a trend of downbeat economic data.
A survey from the Institute for Supply Management on Thursday showed U.S. factory activity slowed more than expected in December, and leading economies in Asia and Europe have reported a fall in manufacturing activity.
A robust U.S. jobs report also added to broader market optimism.
Despite some demand-side worries, oil has received support as supply cuts announced by the global coalition of producers known as OPEC+ kick in.
OPEC, Russia, and other non-members agreed in December to reduce supply by 1.2 million barrels per day (bpd) in 2019. OPEC’s share of that cut is 800,000 bpd. A Reuters survey on Thursday found OPEC supply fell by 460,000 bpd in December.
The focus now will be on whether producers deliver further curbs in January to implement the deal fully. Iraq said on Friday it was committed to the deal and would keep its oil production at 4.513 million bpd for the first half of 2019.