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

CNBC

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

CNBC

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 rise ahead of trade deal, likely stock draw

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Reuters
KEY POINTS
  • Brent crude was up 16 cents, or 0.3%, at $64.36 per barrel by 0301 GMT after falling 1% on Monday. U.S. West Texas Intermediate crude futures were up 13 cents, or 0.2%, at $58.21 a barrel.
  • 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.
  • 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.-Iranian tension and wants to see sustainable prices and demand growth.
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Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices edged higher on Tuesday as investors focused on the signing of a preliminary trade deal between the United States and China, the world’s top oil consumers, and on expectations of a drawdown in U.S. crude oil inventories.

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.

Brent crude was up 16 cents, or 0.3%, at $64.36 per barrel by 0301 GMT after falling 1% on Monday. U.S. West Texas Intermediate crude futures were up 13 cents, or 0.2%, at $58.21 a barrel.

“Oil prices are modestly rebounding, following four days of intense selling,” said Edward Moya, analyst at brokerage OANDA, pointing to trade-deal optimism and fading concerns over the U.S.-Iran conflict.

“Oil prices are tentatively rebounding after seller exhaustion kicked in as investors await the next developments on the trade front and as earnings season begins.”

Oil prices were supported ahead of the signing at the White House on Wednesday of a Phase 1 trade deal, which marks a major step in ending a dispute that has cut global growth and dented demand for oil.

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.

“Regardless whether the deal is signed, we might have a buy the rumours, sell the fact scenario unfolding,” he added.

Separately, U.S. crude oil inventories were expected to have fallen last week, a preliminary Reuters poll showed on Monday, helping to boost prices.

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.

China’s crude oil imports in 2019 grew by nearly 10 percent from the previous year on demand growth from new mega-refineries, customs data showed.

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.-Iranian tension and wants to see sustainable prices and demand growth.

Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander on Jan. 3 and Iran retaliated with missiles launched against U.S. bases in Iraq. But they slumped again as Washington and Tehran retreated from the brink of direct conflict last week.

Prince Abdulaziz said it was too early to talk about whether the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, would continue with production curbs set to expire in March.

Oil steady on easing US-Iran tensions, eyes on China trade deal

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Reuters
KEY POINTS
  • Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.
  • Oil prices had surged after the killing of an Iranian commander by a U.S. drone strike and the launch of Iranian missiles in retaliation, but then slumped as the United States and Iran stepped back from the brink of direct conflict.
  • Meanwhile, expectations of thawing trade tensions between the United States and China, the world’s two biggest oil consumers, have offered support for prices.
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A damaged installation in Saudi Arabia’s Abqaiq oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices held steady on Monday as fears of conflict between the United States and Iran eased, with investors shifting their focus to this week’s scheduled signing of an initial U.S.-China trade deal, which could boost economic growth and demand.

Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.

Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander and Iran retaliated with missiles launched against U.S. bases in Iraq, but slumped again as Washington and Tehran retreated from the brink of direct conflict.

Global benchmark Brent touched $71.75 per barrel last week before ending on Friday below $65.

“The possibility of the war between the United States and Iran has disappeared … For the week, the signing of the U.S.-China trade deal would lift oil prices on expectations for higher demand,” said Kim Kwang-rae, a commodities analyst at Samsung Futures in Seoul.

Backwardation in Brent, a market structure where prices for near-term contracts are higher than those for later contracts, is currently at 72 cents per barrel, from 84 cent a week earlier, whereas the WTI backwardation is at 4 cents a barrel from 23 cents last week.

Backwardation tends to reflect tightening supplies, and the narrowing of the values indicate that worries over supply disruption are receding.

“The fundamentals for WTI remain weak for the coming months and stocks are expected to build at Cushing,” said Virendra Chauhan, an oil analyst at Energy Aspects in Singapore.

“For Brent, which is a broader indicator of the global crude market, it is a combination of supply and demand,” he added.

“Sentiment appears to have turned a corner on the trade-war front, while some green shoots regarding industrial activity and the start of fiscal stimulus, could mean demand surprised to the upside.”

A U.S.-China trade deal is due to be signed in Washington on Wednesday.

Oil prices fall further as threat of Middle East war recedes

CNBC

Reuters
KEY POINTS
  • Brent crude fell 20 cents, or 0.3%, at $65.17 by 0240 GMT, and is heading for its first decline in six weeks, down 5%.
  • WTI was down 20 cents, or 0.3%, at $59.36 and also on track for a first weekly drop in six, nearly 6% from last Friday’s close based on the latest prices.
  • Oil is now below where it was before a U.S. drone strike killed a top Iranian general on Jan. 3.
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Oil pump jacks pump oil in Al-Jbessa oil field in Al-Shaddadeh town of Al-Hasakah governorate April 2, 2010.
Stringer | Reuters

Oil prices dropped on Friday extending days of losses as the threat of war in the Middle East receded and investors  switched attention to economic growth prospects and the rise in U.S. crude oil and product inventories.

Brent crude fell 20 cents, or 0.3%, at $65.17 by 0240 GMT, and is heading for its first decline in six weeks, down 5%. WTI was down 20 cents, or 0.3%, at $59.36 and also on track for a first weekly drop in six, nearly 6% from last Friday’s close based on the latest prices.

Oil is now below where it was before a U.S. drone strike killed a top Iranian general on Jan. 3, with Iran responding with a ballistic missile attack on Iraqi air bases hosting U.S. forces this week that left no casualties.

“Although markets are rightly pricing in a lower risk of … supply-side disruptions in the Middle East, we still think there remains some ongoing risk to output from geopolitical issues in the region,” J.P.Morgan said in a commodities note.

A Ukrainian airliner that crashed in Iran in the early hours of Wednesday after Iran launched the attacks on the bases in Iraq, was likely brought down by an Iranian missile, Canada’s Prime Minister Justin Trudeau said on Thursday.

All the nearly 180 passengers on board the Ukraine International Airlines flight to Kiev from Tehran died in the crash. Iran denied it was hit by a missile.

For now though oil investors are focusing on areas away from the conflict.

Crude stocks in the world’s biggest producer rose against forecast last week and gasoline inventories were up by the most in a week in four years, the U.S. Energy Information Administration said on Wednesday.

“There’s too much supply out there,” a Japan-based based oil executive told Reuters.