Oil steady as US-Iran conflict eases, trade deal details elusive

Iranian oil tanker Grace 1 sits anchored awaiting a court ruling on whether it can be freed after it was seized in July by British Royal Marines off the coast of the British Mediterranean territory in the Strait of Gibraltar southern Spain

Brent, the global benchmark for crude, was down 65 cents, or 1 per cent, at $64.33 per barrel by 11:37 a.m. EST (15:37 GMT), continuing its slide from the middle of last week when the United States and Iran moved away from an outright war after Tehran fired missiles at USA airbases in Iraq. The benchmarks lost about 5% and 6%, respectively, last week.

However, price gains were capped by receding Middle East tensions, with both Tehran and Washington desisting from any further escalation after this month's clashes.

West Texas Intermediate crude oil is now trading at $58.16 having travelled between a low of $57.97 and $59.26, -1.71% on the day so far and well below the $65.65s post Iranian missile strikes on Iraqi targets. It lifted its Brent crude price forecast by 7.1% to $64.83 for 2020. -China trade deal, scheduled to be signed on Wednesday, leads to increased demand growth. "In case of a trade deal upward revisions can be anticipated", Vargas said.

China has pledged to buy more than $50 billion in energy supplies from the United States over the next two years, according to a source briefed on the trade deal.

Still, with traders already pricing in the signing of the deal, there is more downside risk to prices, said Michael McCarthy, chief market strategist at CMC Markets.

Elsewhere, Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened U.S.

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The recent declines followed investors unwinding bullish positions built following the killing of a senior Iranian general in a USA air strike in Iraq on January 2 which sent oil prices to a four-month high, global oil strategist at BNP Paribas in London Harry Tchilinguirian said.

U.S. gasoline stocks rose by the most in one week in four years, surging by 9.1 million barrels in the week to January 3, the U.S. Energy Information Administration reported last week.

The trade war between the world's two biggest energy consumers had a tangible impact on global oil demand growth past year, said Tamas Varga, an analyst at broker PVM.

With tensions between the United States and Iran cooling, investors have had time to focus on fundamental demand issues, said John Kilduff, partner at Again Capital LLC in NY.

For his part, John Kemp, commodities analyst at Reuters, on Monday noted that hedge funds gambled heavily on an oil price recovery in 2020 largely on the strength of continued tension between the US and Iran - and now that tensions seem to be diminishing, prices are vulnerable "to a sharp correction". But they have slumped again as Washington and Tehran retreated from the brink of direct conflict last week.

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