Oil prices fall on signs of large US stock build

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Reuters
KEY POINTS
  • Global benchmark Brent crude oil futures was down by 47 cents, or 0.8%, at $58.95 a barrel by 0330 GMT.
  • U.S. crude oil futures were down 48 cents, or 0.9%, at $52.88 after earlier dropping more than 1% to a session low of $52.76 earlier.
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The oil tanker ‘Devon’ prepares to transfer crude oil from Kharg Island oil terminal to India in the Persian Gulf, Iran, on March 23, 2018.
Ali Mohammadi | Bloomberg | Getty Images

Oil prices eased on Thursday after industry data showed a larger-than-expected build-up in stocks in the United States, although losses were limited by comments by U.S. Treasury Secretary Steven Mnuchin on a U.S.-China trade deal.

Global benchmark Brent crude oil futures was down by 47 cents, or 0.8%, at $58.95 a barrel by 0330 GMT.

U.S. crude oil futures were down 48 cents, or 0.9%, at $52.88 after earlier dropping more than 1% to a session low of $52.76 earlier.

U.S. crude inventories soared by 10.5 million barrels to 432.5 million barrels in the week to Oct. 11, according to the American Petroleum Institute’s weekly report, published ahead of official government stocks data due on Thursday.

Analysts had estimated U.S. crude inventories rose around 2.8 million barrels last week.

“An enormous U.S. inventory build hits at precisely the wrong moment when the markets are overly focused on demand devastation due to the latest run of weaker global economic data,” Stephen Innes, Asia Pacific market strategist at AxiTrader, said in a note on Thursday.

If confirmed by the government data, the build-up would be the biggest U.S. inventory swell since February, 2017, Innes said.

It comes amid concerns about the global economy — and therefore oil demand — as data from the United States showed retail sales fell for the first time in seven months in September. That followed earlier data showing a moderation in job growth and services sector activity.

Still, hopes of a potential U.S.-China trade deal helped offset oil prices losses after Mnuchin said U.S. and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month.

“Overall, we are seeing a more constructive picture both in terms of the demand side of the equation with the partial agreement from the U.S. (and) also from a technical point of view. (Prices) are at close to the bottom end of trading range rather than the top,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

But short-term pressure on oil prices will likely remain until U.S. government data on oil inventory is out later on Thursday, he added.

Oil prices rise after US confirms trade talks with China to start

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Reuters
KEY POINTS
  • Brent crude was up 21 cents, or 0.4%, at $60.91 a barrel by 0301 GMT. On Wednesday, Brent rose 4.2%.
  • West Texas Intermediate (WTI) was up 17 cents, or 0.3%, at $56.43 a barrel, having risen 4.3% the previous session, the biggest percentage gain in nearly two months.
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An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner
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Oil prices rose on Thursday, rebounding from earlier losses, after the U.S. confirmed that talks with China to reach a trade agreement would be held in the coming weeks, giving hope that a dispute that has roiled global economies will be resolved.

The gains add to a surge in prices on Wednesday that had been driven by a survey showing activity in China’s services sector expanded at the fastest pace in three months in August, as new orders rose in the world’s second-biggest consumer of oil.

Brent crude was up 21 cents, or 0.4%, at $60.91 a barrel by 0301 GMT. On Wednesday, Brent rose 4.2%.

West Texas Intermediate (WTI) was up 17 cents, or 0.3%, at $56.43 a barrel, having risen 4.3% the previous session, the biggest percentage gain in nearly two months.

Both contracts were lower earlier in the Asian trading session after data late on Wednesday from the American Petroleum Institute (API) showed U.S. crude stocks rose last week, against expectations of a decline.

U.S. Trade Representative (USTR) Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He and agreed to hold ministerial-level trade talks in Washington “in the coming weeks”, a USTR spokesman said late on Wednesday.

Shortly after in Beijing, China’s commerce ministry said the talks would be held and “both sides agreed that they should work together and take practical actions to create good conditions for consultations.”

As the trade war between the United States and China has rumbled on into a second year, evidence has been mounting that economies worldwide are being hit, prompting downgrades of oil demand growth expectations.

BP Plc’s Chief Financial Officer Brian Gilvary told Reuters on Wednesday that global oil demand is expected to grow by less than 1 million barrels per day in 2019 as consumption slows.

Still, supply looks set to stay constrained as Russian officials and sources from the Organization of the Petroleum Exporting Countries (OPEC) indicated the countries remain committed to an agreement to rein in production to support prices.

Crude inventories in the United States rose by 401,000 barrels in the week ended Aug. 30 to 429.1 million, compared with analysts’ expectations for a decrease of 2.5 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 238,000 barrels, while refinery crude runs fell by 306,000 barrels per day, API said.

Oil rises as drop in US inventories eases recession worries

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Reuters
KEY POINTS
  • Brent crude was up by 37 cents, or 0.6%, at $59.88 a barrel by 0220 GMT.
  • West Texas intermediate crude was up 55 cents, or 1.0%, at $55.48 a barrel.
  • U.S. crude stockpiles fell sharply last week as imports dropped, plummeting by 11.1 million barrels, compared with expectations for a 2 million barrel draw, data from industry group, the American Petroleum Institute (API), showed.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil prices rose on Wednesday, with U.S. crude gaining 1% after an inventory report showed U.S. stockpiles fell more than expected, helping ease worries about economic growth due to the Sino-U.S. trade war.

Brent crude was up by 37 cents, or 0.6%, at $59.88 a barrel by 0220 GMT. West Texas intermediate crude was up 55 cents, or 1.0%, at $55.48 a barrel.

U.S. crude stockpiles fell sharply last week as imports dropped, plummeting by 11.1 million barrels, compared with expectations for a 2 million barrel draw, data from industry group, the American Petroleum Institute (API), showed.

The U.S. government’s weekly report is due to be released Wednesday morning and if official numbers confirm the API data then it will be the biggest weekly decline in nine weeks.

“The mammoth crude inventory draw has, at least for the time being, put to rest those U.S. recessionary doom and gloom fears that have been hanging over oil markets like a dark cloud,” said Stephen Innes, managing partner at Valour Markets.

Still, concerns about global growth amid the raging trade war between the United States and China are likely to cap gains.

U.S. President Donald Trump said on Monday that he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.

On Tuesday, however, concerns about trade resurfaced after China’s foreign ministry that it had not heard of any recent telephone call between the United States and China on trade, and said it hopes Washington can stop its wrong actions and create conditions for talks.

Crude oil prices have fallen about 20% from 2019 highs reached in April, partly because of worries that the U.S.-China trade war is hurting the global economy, which could dent demand for oil.

“Global recession risks are higher than at any stage since the (global financial crisis) and the U.S. is not immune,” Morgan Stanley said.

China’s Commerce Ministry last week said it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.

In retaliation, Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.

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

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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.
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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.