UPDATE 9-Oil rises nearly 4% on U.S.-China trade hopes, but sets weekly decline

* U.S. says phase one trade deal with China in good shape
* Prices supported by shutdown at Keystone pipeline after
spill
* U.S. non-farm payrolls increase 128,000 in October
* Figures show surprising pick-up in Chinese factory
activity
* U.S. oil drillers cut rigs for 2nd week in a row -Baker
Hughes

(Updates to settlement)
By Devika Krishna Kumar
NEW YORK, Nov 1 (Reuters) - Oil prices rose nearly 4% on
Friday on signs of progress in U.S.-China trade talks and
stronger-than-expected economic data in both countries,
including U.S. employment and Chinese manufacturing activity
numbers.
Brent crude LCOc1 ended the session up $2.07, or 3.5%, at
$61.69 a barrel, but notched a drop of about 0.4% for the week.
West Texas Intermediate crude CLc1 settled $2.02, or 3.7%
higher at $56.20 a barrel, but fell about 0.8% in the week.
U.S.-China trade talks are progressing well and the United
States aims to sign an initial deal this month, top Trump
administration officials said, offering reassurance to global
markets after nearly 16 months of tit-for-tat tariffs.
Beijing's state-media Xinhua News Agency said the world's
two largest economies had reached "consensus on principles"
during a serious and constructive telephone call on Friday
between their main trade negotiators. U.S. and Chinese negotiators had made "enormous progress"
toward finalizing a "phase one" agreement, although the deal was
not yet 100% complete, White House economic adviser Larry Kudlow
told reporters.
"You're going to get a strong reaction from what seems like
a deal for now," said John Kilduff, a partner at Again Capital
Management in New York.
"This markedly improves the outlook for the global economy –
particularly in Asia where it has suffered the most from the
fallout from the trade war."
Both benchmarks fell earlier in the week after a hike in
U.S. crude inventories, especially at the Cushing, Oklahoma,
delivery hub for WTI, and as the trade war weighed on prices,
fanning fears that slowing economic growth could dent demand for
oil.
"The market has been driven lower this week on fears of
slowing demand growth because of uncertainty regarding
U.S.-China trade relations and a sizeable expected build in
crude stocks," said Gene McGillian, vice president of market
research at Tradition Energy in Stamford, Connecticut.
"I think today's action is a reversal of that, and you're
probably also seeing some weekend covering."
U.S. crude prices also received some support after a leak in
North Dakota forced TC Energy Corp TRP.TO to shut its
590,000-barrel-per-day (bpd) Keystone pipeline that brings
Canadian crude from northern Alberta to refineries in the U.S.
Midwest. The pipeline also flows to Cushing, where the outage is
expected to drain inventories.
Prices were also supported on Friday by expansion in China's
factory activity at the fastest pace since 2017, raising
optimism over the health of its economy. U.S. jobs growth also
slowed less than expected in October. the positive jobs report and the Fed recently lowering
interest rates, I think it definitely eases some concerns around
U.S. economic growth," McGillian said. "Worries about economic
growth are largely in Europe and Asia."
A Reuters survey, however, showed that oil prices were
expected to remain under pressure this year and next. The poll
of 51 economists and analysts forecast Brent crude would average
$64.16 a barrel in 2019 and $62.38 next year.
Another Reuters survey found output from the Organization of
the Petroleum Exporting Countries recovered in October from an
eight-year low, with a rapid recovery in Saudi production from
attacks on its oil infrastructure in September offsetting losses
in Ecuador and voluntary curbs under an international supply
pact. On Wednesday, government data showed that U.S. crude
inventories USOILC=ECI rose by 5.7 million barrels last week,
dwarfing expectations for an increase of just 494,000 barrels.
EIA/S
U.S. crude production soared nearly 600,000 barrels per day
in August to a record 12.4 million, buoyed by a 30% increase in
Gulf of Mexico output, government data released on Thursday
showed. Prices were also supported after U.S. energy firms this
week reduced the number of oil rigs operating for a second week
in a row as independent producers cut spending as record crude
production weighs on the outlook for energy prices. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC: U.S., Russian, Saudi crude oil production https://tmsnrt.rs/2QYNGAd
Oil production in U.S. vs. OPEC png https://tmsnrt.rs/2NmETa0
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