By Barani Krishnan
Investing.com - Oil is getting a boost from a positive spin on U.S.-China trade talks and reports of a new drone attack on a Saudi oilfield. But the bigger factor for the week could be what transpires at the Kansas City Fed's annual gathering in Jackson Hole, Wyo.
New York-traded West Texas Intermediate crude settled up $1.23, or 2.2%, at $56.13 per barrel.
London-traded Brent crude gained $1.01, or 1.7%. But the benchmark for oil outside of the U.S. remained below the key $60 per barrel mark, settling at $59.65
Crude benefited from a broad-based rally in risk assets after a weekend of mostly upbeat talk from the U.S. administration about trade. White House economic adviser Larry Kudlow said recent conversations between both sides had been “positive” and teleconferences would continue for a week to 10 days.
Kudlow indicated that those could lead to “substantive renewal of negotiations” that could begin with a visit from Chinese negotiators to the U.S.
President Donald Trump, nonetheless, repeated that he was not ready to “make a deal yet.”
Yemeni rebels, meanwhile, reportedly attacked an oil facility in Saudi Arabia over the weekend, causing a fire at a gas plant and adding to geopolitical risk premiums. Although reports suggested that it would take at least a week to repair the damage, state-run Saudi Aramco said oil production was not affected.
"We view those attacks more symbolic than a real risk to crude oil flows,” said Olivier Jakob, founder of the Petromatrix oil consultancy in Zug, Switzerland. “They are a reminder that Saudi Arabia does not have everything under control, but cause only limited damage to crude oil production or pipelines."
Away from the drone attack and trade talks, this week's attention will likely be on the Federal Reserve's annual gathering in Jackson Hole, where cues on the central bank's next rate decision are expected.
While Fed Chairman Jay Powell’s Friday speech will be a high point at the three-day gathering, other discussions that even remotely touch on interest rates can trigger significant market moves, especially with investors psyched up for another Fed cut in September. Any hints of a rate reduction will almost certainly boost crude prices.
Ole Hansen, head of commodity strategy at Saxo Bank, noted via Twitter that global demand fears were continuing to put pressure on Brent's premium over the U.S. benchmark WTI. He flagged data from the Commodity and Futures Trading Commission on Friday that showed net long speculative interest in WTI rising above its five-year average, even as it fell below the five-year average for Brent.
Despite the pressure on WTI, the U.S. crude benchmark has consistently traded at a discount to Brent since the start of the shale oil boom.
Also weighing on prices, Baker Hughes’ data released on Friday showed that U.S. energy firms increased the number of oil rigs operating for the first time in seven weeks, despite plans by most producers to cut spending on new drilling this year.