Oil gains after US-China trade deal and a rise in crude inventories

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Reuters
KEY POINTS
  • Oil prices rose on Thursday after the signing of an initial trade deal that sets the stage for a surge in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.
  • Brent was 45 cents, or 0.7%, higher at $64.45 a barrel by 0310 GMT.
  • U.S. crude was up by 39 cents, or 0.7%, at $58.20 a barrel.
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A drilling crew secures a stand of drill pipe into the mouse hole on a drilling rig near Midland, Texas February 12, 2019.
Nick Oxford | Reuters

Oil prices rose on Thursday after the signing of an initial Sino-U.S. trade deal that sets the stage for a surge in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.

Brent was 45 cents, or 0.7%, higher at $64.45 a barrel by 0310 GMT, while U.S. crude was up by 39 cents, or 0.7%, at $58.20 a barrel.

Under the so-called Phase 1 deal to call a truce in a trade war between the world’s two biggest economies, China committed to buying over $50 billion more of U.S. oil, liquefied natural gas and other energy products over two years.

“It was a formal signing of something which had already been agreed, but that has certainly boosted sentiment,” said Virendra Chauhan, oil analyst at Energy Aspects.

Trade sources and analysts said China could struggle to meet the target and gains in oil are likely to be limited ahead of more detail on how the commitments will be achieved.

Official U.S. data showing a much bigger than expected drop in crude oil inventories, also helped underpin prices, Chauhan said.

“They were slightly constructive. We saw a counter-seasonal draw in U.S.crude stocks and that generally is supportive,” he said.

Oil inventories fell by 2.5 million barrels, compared with analyst expectations of a drop of 500,000 barrels, according to data from the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.

Nonetheless, gasoline stocks rose by 6.7 million barrels and distillate stocks were up by 8.2 million barrels, according to the EIA.

U.S. crude production also rose to a record 13 million barrels per day, the agency said.

Oil prices are returning to range trading, analysts said, as the threat of conflict between Iran and the U.S. receded further after they traded missile and drone attacks earlier this month.

That sent Brent to highs above $71 a barrel, before prices touched more than one-month lows in advance of the signing of the U.S.-China deal.

Oil drops on concerns that US-China trade deal may not stoke demand

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Reuters
KEY POINTS
  • Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world’s biggest oil users, may not boost demand.
  • Brent crude was down 19 cents, or 0.3%, at $64.30 per barrel by 0428 GMT.
  • U.S. West Texas Intermediate crude futures were down 19 cents, or 0.3%, at $58.04 a barrel.
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A policeman is seen at West Qurna-1 oil field, which is operated by ExxonMobil, in Basra, Iraq January 9, 2020.
Essam al-Sudani | Reuters

Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world’s biggest oil users, may not boost demand as the U.S. intends to keep tariffs on Chinese goods until a second phase.

U.S. Treasury Secretary Steven Mnuchin said late on Tuesday that tariffs on Chinese goods will remain in place until the completion of a second phase of a U.S.-China trade agreement, even as both sides are expected to sign an interim deal later on Wednesday.

Brent crude was down 19 cents, or 0.3%, at $64.30 per barrel by 0428 GMT. U.S. West Texas Intermediate crude futures were down 19 cents, or 0.3%, at $58.04 a barrel.

“A pickup with global demand for crude may struggle as U.S.-Chinese tensions linger after some hardline stances from the Trump administration,” said Edward Moya, analyst at brokerage OANDA.

“Financial markets are disappointed that the Trump administration … signalled tariffs will remain in place until after the 2020 U.S. Presidential election, depending on whether China comes through on their promises with the phase-one agreement.”

U.S. President Donald Trump is slated to sign the Phase 1 agreement with Chinese Vice Premier Liu He at the White House on Wednesday. That agreement is expected to include provisions for China to buy up to $50 billion more in U.S. energy supplies.

Adding to worries over U.S.-China trade relations, the U.S. government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to Chinese technology giant Huawei, according to two sources.

Meanwhile, U.S. crude inventories rose by 1.1 million barrels, data from the American Petroleum Institute showed, countering expectations for a draw.

U.S. oil production is expected to rise to a record of 13.30 million barrels per day in 2020, mainly driven by higher output in the Permian region of Texas and New Mexico, the U.S. Energy Information Administration (EIA) said.

Oil prices edge lower ahead of US stockpile numbers

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Reuters
KEY POINTS
  • Brent futures were down 6 cents at $61.51 a barrel by 0311 GMT, having fallen 0.7% on Monday.
  • U.S. West Texas Intermediate (WTI) crude was down 12 cents at $55.69, after falling 1.5% in the previous session.
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A line of oil tankers transporting fuel to the refineries located along the Mississippi River just north of New Orleans, Louisiana.
Art Wager | Getty Images

Oil prices slipped on Tuesday as investors awaited U.S. crude inventory data for a pointer on oil demand trends, while concerns about slower economic growth overshadowed signs of a thawing in the trade war between Washington and Beijing.

Brent futures were down 6 cents at $61.51 a barrel by 0311 GMT, having fallen 0.7% on Monday.

U.S. West Texas Intermediate (WTI) crude was down 12 cents at $55.69, after falling 1.5% in the previous session.

Prices rose sharply last week amid a decline in U.S. inventories and signs of an easing in the U.S.-China trade war, but worries on Monday about weaker economic growth offset hopes of a rise in oil demand even if trade talks progress.

“The inventory read last week is still reverberating through trading, although we did see that finally start to give way last night, but we can see there is very little appetite to go on with it today,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

U.S. crude inventories were forecast to have increased by around 700,000 barrels last week, according to a Reuters poll of analysts, having unexpectedly fallen the previous week, the first decline in six weeks.

U.S. crude oil stockpiles at Cushing, Oklahoma, the delivery point for WTI, have risen by about 1.5 million barrels in the week through Oct. 25, traders said earlier, citing data from market intelligence firm Genscape.

The American Petroleum Institute releases industry data later on Tuesday, while the U.S. government’s Energy Information Administration releases inventory data on Wednesday.

The United States Trade Representative is studying whether to extend tariff suspensions on $34 billion of Chinese goods set to expire on Dec. 28 this year, the agency said on Monday.

U.S. President Donald Trump said earlier on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.

Leaders of the world’s two biggest economies are working to agree on the text for a “Phase 1” trade agreement announced by Trump on Oct. 11. Trump has said he hopes to sign the deal with China’s President Xi Jinping next month at a summit in Chile.

The trade war has hit economic growth around the world and kept oil prices range-bound for months.

Oil hits six-week high on hopes of extended OPEC output cuts

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Reuters
KEY POINTS
  • Brent was up 26 cents, or 0.4%, at $62.85 a barrel by 0349 GMT.
  • U.S. crude was 27 cents, or 0.5%, higher at $58.12 a barrel.
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Morgan Brennan | CNBC

Oil futures hit a six-week high on Tuesday, rising for a fifth day on optimism that OPEC and other countries may agree to extend production cuts in a bid to support prices.

Brent was up 26 cents, or 0.4%, at $62.85 a barrel by 0349 GMT, while U.S. crude was 27 cents, or 0.5%, higher at $58.12 a barrel. Brent touched its highest since Aug. 1, while U.S. crude rose to the highest since July 31.

U.S. oil gained more than 2% on Monday, while Brent finished the day 1.7% higher as the market reacted to the appointment by Saudi Arabia’s king of his son, Prince Abdulaziz bin Salman, as energy minister on Sunday.

Prince Abdulaziz, a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC), said the pillars of Saudi Arabia’s policy would not change and a global deal to cut oil production by 1.2 million barrels per day would be maintained.

He added that the so-called OPEC+ alliance, made up of OPEC and non-OPEC countries including Russia, would be in place for the long term.

A meeting of OPEC and OPEC+ countries in Abu Dhabi this week “is stirring up hopes for additional supply cuts,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Still, Russia’s oil output in August exceeded its quota under the OPEC+ agreements.

“Markets will need to see concrete progress on the production front, even as the world’s economy slows, to sustain gains,” said Jeffrey Halley, senior market analyst at OANDA.

Should oil end Tuesday higher it will be the longest run of gains since late July but headwinds remain as the U.S.-China trade war rumbles on.

Executives at the annual Asia Pacific Petroleum Conference said on Monday they expect oil prices this year to be pressured by uncertainties surrounding the global economy, the U.S.-China trade war and increasing U.S. supplies.

In the United States, crude stockpiles are likely to have fallen for a fourth consecutive week last week, a preliminary Reuters poll showed on Monday.

Five analysts polled by Reuters estimated, on average, that crude inventories fell 2.6 million barrels in the week to Sept 6.

Oil rises as Saudi Arabia signals OPEC cuts to continue under new energy minister

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Reuters
KEY POINTS
  • Global benchmark Brent was up 53 cents, or 0.9%, at $62.07 a barrel by 0425 GMT.
  • U.S. West Texas Intermediate was 57 cents, or 1%, higher at $57.09 a barrel.
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Jerome Favre | Bloomberg | Getty Images

Oil rose on Monday on expectations that Saudi Arabia, the world’s largest oil exporter, will continue to support output cuts by OPEC and other producers to prop up prices under new Energy Minister Prince Abdulaziz bin Salman.

Prices climbed for a fourth day and were also supported by comments from the United Arab Emirates’ energy minister that OPEC and its allies are committed to balancing the crude market.

Global benchmark Brent was up 53 cents, or 0.9%, at $62.07 a barrel by 0425 GMT, while U.S. West Texas Intermediate was 57 cents, or 1%, higher at $57.09 a barrel.

Salman, a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC), was named to the position on Sunday, replacing Khalid al-Falih. He is the son of Saudi King Salman and this is the first time the energy portfolio has been handed to a member of the royal family.

He helped to negotiate the current agreement between OPEC and non-OPEC countries including Russia, a group known as OPEC+, to cut global crude supply to support prices and balance the market.

A Saudi official said on Sunday that there would be no shift in Saudi and OPEC policy on the cuts and that Prince Abdulaziz would work to strengthen OPEC and non-OPEC cooperation.

“The change at the top doesn’t necessarily mean a shift in policy as much as it’s being viewed as a move to improve relations within OPEC and with non-OPEC producers in the wake of the latest Russian compliance fissures,” said Stephen Innes, Asia Pacific market strategist at Axi Trader.

Russia’s oil output in August exceeded its quota under the OPEC+ agreements.

UAE’s Minister of Energy and Industry Suhail al-Mazrouei said on Sunday that members of OPEC and non-OPEC producers are “committed” to achieving oil market balance.

Asked about possible deeper production cuts, the minister told a news conference in Abu Dhabi that he was not concerned about current oil prices, rather the level of oil inventories.

Trade and geopolitical tensions are affecting the market more than demand and supply, Mazrouei said, but he was quick to rule out hasty steps influenced by the trade war between the United States and China.

“The fear of slower (oil) demand is only going to happen if that tension is escalating and I am personally hopeful that is not the case,” Mazrouei told Reuters on Sunday.

Prices on Monday were also supported by a rise in oil imports in China in August, with shipments to the world’s biggest importer up 3% from July and nearly 10% higher in the first eight months of 2019 from a year earlier.

“With (refinery) maintenance season wrapping up, oil imports stayed buoyant. Attractive profit margins continues to favour higher imports; despite the industry burdened by higher products inventories,” ANZ Research said in a note.

In the U.S., drilling companies cut the number of operating oil rigs for a third week in a row last week.