Oil slips on uncertainty over US-China trade deal, surging inventories

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Reuters
KEY POINTS
  • Brent crude, the global benchmark, was down 16 cents, or 0.3%, at $62.13 a barrel by 0259 GMT, after gaining 0.9% in the previous session.
  • U.S. West Texas Intermediate (WTI) crude was down 23 cents, or 0.4%, at $56.92 a barrel. The contract rose 1.4% on Thursday.
GP: Oil tank North Dakota 190926
A photo taken August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Crude oil futures fell on Friday amid lingering uncertainty on whether, and when, the United States and China will agree a long-awaited deal to end their bitter trade dispute, the gloom compounded by rising crude inventories in the United States.

Brent crude, the global benchmark, was down 16 cents, or 0.3%, at $62.13 a barrel by 0259 GMT, after gaining 0.9% in the previous session.

U.S. West Texas Intermediate (WTI) crude was down 23 cents, or 0.4%, at $56.92 a barrel. The contract rose 1.4% on Thursday.

The trade war between the world’s two biggest economies has slowed economic growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

On Thursday, the Chinese commerce ministry said the two countries have agreed in the past two weeks to cancel trade tariffs in different phases, without giving a timeline.

But that comment was shrouded in doubt soon after when Reuters reported that the plan faces stiff internal opposition in the U.S. administration.

“Oil is in pause mode as traders await more details on the trade talks,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Also concentrating minds among sector watchers were remarks by OPEC Secretary-General Mohammad Barkindo this week that he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, appearing to downplay any need to cut output more deeply.

A deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, such as Russia, is limiting supplies until March next year. The producers meet on Dec. 5-6 in Vienna to review that policy.

Barkindo’s comments are “spooking the market, especially in the face of the seemingly never-ending run of U.S. inventory builds,” said AxiTrader’s Innes.

U.S. crude oil stockpiles rose sharply last week as refineries cut output and exports dropped, while refined products extended a multi-week drawdown, the Energy Information Administration said on Wednesday.

Stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 1.7 million barrels, the EIA said.

Oil pares gains as US escalates trade war with China

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  • Brent crude futures were at $70.41 a barrel at 0523 GMT, up 2 cents from their last close, after rising to as high as $71.23 a barrel.
  • U.S. West Texas Intermediate (WTI) crude futures <were at $61.78 per barrel, up 8 cents, after rising to as high as $62.49 a barrel earlier in the day.
Russia oil

Sergei Karpukhin | Reuters

Oil prices pared earlier gains on Friday following U.S. President Donald Trump’s tariff increase on $200 billion worth of Chinesegoods took effect, escalating the trade dispute between the world’s two biggest economies and oil consumers.

Prices had risen more than 1 percent earlier in the day as optimism mounted that the tariffs would be averted after U.S. Trump said he received a “beautiful letter” from Chinese President Xi Jinping.

With no move from the Trump administration to reverse the hikes, U.S. Customs and Border Protection imposed the new 25% duty on affected U.S.-bound cargoes leaving China after 12:01 a.m. EDT (0401 GMT) on Friday.

Brent crude futures were at $70.41 a barrel at 0523 GMT, up 2 cents from their last close, after rising to as high as $71.23 a barrel.

U.S. West Texas Intermediate (WTI) crude futures <were at $61.78 per barrel, up 8 cents, after rising to as high as $62.49 a barrel earlier in the day.

U.S. stock futures fell and Asian shares pared gains as China said it would retaliate over the tariff increases.

“Oil prices along with most risk assets are moving almost in sync on trade tariff updates,” said Edward Moya, senior market analyst at futures brokerage OANDA.

Trump threatened to levy the additional tariffs on Sunday on signs that China would not accept portions of the trade agreement that it earlier indicated it accepted.

A break down in trade between the world’s two largest oil consumers would likely impact oil demand. The two countries combined to make up 34 percent of global oil consumption during the first quarter of 2019, according to data from the International Energy Agency.

Concerns of rising oil supply on reports of growing stockpiles along with the potential impact on demand has pushed oil prices lower for the week.

U.S. crude is heading for a weekly loss of 0.3%, its third week of consecutive declines. Brent is heading for its second weekly loss, down 0.6%.

However, the efforts by the Organisation of the Petroleum Exporting Countries (OPEC) to crimp supply to reduce global inventories has supported prices.

Overall expectations are also that demand in 2019 will rise.

The U.S. Energy Information Administration expects global oil demand to rise by 1.4 million barrels per day this year.

Oil falls as trade row fears outweigh drop in US crude stocks

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  • Brent crude oil futures were at $69.72 a barrel by 0251 GMT, down 65 cents, or 0.9%, from their previous settlement. They earlier fell more than 1%.
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.52 per barrel, down 60 cents, or 1%, having also fallen more than 1% earlier.
Oil operations in the Permian Basin near Midland, Texas

Nick Oxford | Reuters
Oil operations in the Permian Basin near Midland, Texas

Oil prices dropped 1% on Thursday amid concerns over the escalating trade battle between the United States and China, despite a surprise fall in U.S. crude stockpiles.

Brent crude oil futures were at $69.72 a barrel by 0251 GMT, down 65 cents, or 0.9%, from their previous settlement. They earlier fell more than 1%.

U.S. West Texas Intermediate (WTI) crude futures were at $61.52 per barrel, down 60 cents, or 1%, having also fallen more than 1% earlier.

“The inventory numbers from the U.S. only gave oil a transitory boost. It is going to be all about whether the trade talks today can stop Friday’s tariff-geddon,” said Jeffrey Halley, senior market analyst at OANDA in Singapore.

The Sino-U.S. trade war has weighed on oil prices this week as heightened tensions between the world’s two biggest economies cloud the global economic outlook.

U.S. President Donald Trump said on Wednesday that China “broke the deal” in trade talks with Washington and would face stiff tariffs if no agreement is reached.

Higher tariffs are set to take effect on Friday, during Chinese Vice Premier Liu He’s two-day visit to Washington from Thursday.

“Enough progress made to make Mr Trump roll back his threats could see oil make back all of its recent loses in double quick time,” said Halley. “A poor outcome will see the rot move deeper and oil’s recent fall continuing,” he added.

Oil prices have had some support from signs of tighter global supply on the back of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.

Both the Brent and WTI benchmarks have risen more than 30% so far this year.

Global supply has also been tightened by U.S. sanctions on OPEC members Venezuela and Iran.

“From a fundamental point of view, OPEC supply discipline is still in check, and U.S. supplies show tighter markets than expected while Asia demand is still robust,” said Stephen Innes head of trading at SPI Asset Management.

“All of which suggests once the trade war-induced sell-offs abate conditions could settle themselves quickly,” Innes said.

In a sign that Asia demand remains firm, China’s crude imports in April hit a record for the month, at 10.6 million barrels per day (bpd), customs data showed on Wednesday. China is the world’s biggest oil importer.

An unexpected drop in U.S. crude inventories kept oil price declines in check. U.S. crude inventories fell by 4 million barrels in the week to May 3, the Energy Information Administration said on Wednesday.

Oil prices firm amid US sanctions on crude exporters Iran, Venezuela

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Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.56 per barrel at 0057 GMT on Wednesday, 17 cents, or 0.3 percent, above their last settlement.
  • Brent crude oil futures were at $69.94 per barrel, 6 cents, or 0.1 percent, above their last close.
RT: Oil operations Permian Basin near Midland, Texas 180823
A worker walks through an oil production facility owned by Parsley Energy in the Permian Basin near Midland, Texas, August 23, 2018.
Nick Oxford | Reuters

Oil prices stabilized on Wednesday as markets remained relatively tight amid U.S. sanctions on crude exporters Iran and Venezuela.

U.S. West Texas Intermediate (WTI) crude futures were at $61.56 per barrel at 0057 GMT on Wednesday, 17 cents, or 0.3 percent, above their last settlement.

Brent crude oil futures were at $69.94 per barrel, 6 cents, or 0.1 percent, above their last close.

With U.S. sanctions on Iran and Venezuela in place, analysts said global oil markets remained tight.

“The tight and price-supportive fundamental outlook has not gone away,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

The United States re-imposed sanctions on Iran in November last year, demanding all countries stop importing oil from the country.

Iran has said it will defy the sanctions and continue to export oil.

Most analysts expect its crude export to fall to little more than 500,000 barrels per day, down from around 1 million bpd in April, as governments largely bow to American pressure.

Washington has also slapped sanctions on Venezuelan oil exports, further disrupting crude supply.

Wednesday’s firmer prices partly reversed bigger price falls earlier in the week, which were triggered by announcements from Washington that the United States would this Friday further hike import tariffs on Chinese goods.

“Intensifying trade tensions are raising question on … oil demand prospects,” ANZ bank said on Wednesday.

Oil prices under pressure from US-China trade dispute, market remains tense

CNBC
Reuters

  • Brent crude oil futures were at $71.09 per barrel at 0341 GMT, 15 cents, or 0.2 percent, below their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $62.20 per barrel, 5 cents below their last settlement.
RT: Oil Iraq OPEC flames 161014
Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, October 14, 2016.
Essam Al-Sudani | Reuters

Oil prices were under pressure on Tuesday from concerns the escalating Sino-U.S. trade dispute could slow the global economy, while U.S. sanctions on crude exporters Iran and Venezuela helped keep the market on edge.

Brent crude oil futures were at $71.09 per barrel at 0341 GMT, 15 cents, or 0.2 percent, below their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $62.20 per barrel, 5 cents below their last settlement.

Analysts said there were a number of factors driving oil prices.

One is a concern that global economic growth is threatened by the intensifying trade dispute between the United States and China.

Talks between the world’s two biggest economies hit a wall over the weekend, when U.S. President Donald Trump announced a raft of new import tariffs on Chinese goods.

“U.S.-China trade tensions are set to be at the forefront of the market’s collective mind this week, as any nuance out of discussions in Washington could trigger knee-jerk moves by traders,” said Han Tan, analyst at futures brokerage FXTM.

Tanker brokerage Eastport said in a note that “worsening trade friction between Washington and Beijing poses a downside risk to our forecasts” for petroleum products.

On the supply-side, oil markets remain tense as the United States tightens sanctions on Iranian oil exports, saying on Monday it was boosting its military presence in the Middle East.

Iran has threatened “reciprocal actions” against U.S. sanctions, which could mean restarting some of its nuclear programme.

The U.S. sanctions have already halved Iranian crude oil exports over the past year to below 1 million barrels per day (bpd), and shipments to customers are expected to drop as low as 500,000 bpd in May as sanctions tighten.

Beyond Iran, the crisis in Venezuela has also disrupted oil supplies from this OPEC member, with Washington placing oil sanctions on the Venezuelan government under President Nicolas Maduro.

“As the White House raises the stakes on Iran and Venezuela, what is the oil endgame?” asked Bank of America Merrill Lynch in a note.

“The Venezuelan political situation seems untenable but oil exports could continue to contract until the industry receives a capital injection, a dim prospect for now,” the bank said.

“In addition … Iran oil exports could collapse further over the coming months. While America’s maximum pressure policy on these two regimes may pay off, additional oil supply losses cannot be ruled out,” it added.

Bank of America said it expected Saudi Arabia “to bring back oil production slowly as Iranian barrels exit the market”, adding that overall it saw Brent crude oil prices having a floor at $70 per barrel in current market conditions.