Oil falls but remains set for weekly gain on US-China diplomacy

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Reusable: Idled oil drilling rigs North Dakota
Stacked rigs are seen along with other idled oil drilling equipment in Dickinson, North Dakota, June 26, 2015.
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Oil prices fell on Friday as U.S.-China trade tensions continued to weigh on sentiment despite recent diplomatic progress.

Brent crude was down 94 cents, or 1.6%, at $60.01 a barrel. U.S. West Texas Intermediate (WTI) crude was down $1.08, or 1.9%, at $55.22.

Brent is still set to register its fourth consecutive weekly gain while U.S. crude is on track for a second weekly rise.

Beijing and Washington on Thursday agreed to hold high-level talks in early October. The news cheered investors hoping for an end to a trade war that has brought tit-for-tat tariffs between the world’s two biggest economies, chipping away at economic growth.

The prolonged dispute has had a dampening effect on oil prices, though they have risen over the year thanks partly to production cuts led by the Organization of the Petroleum Exporting Countries and Russia to drain inventories.

However, analysts warn that market fundamentals remain bearish and depend heavily on a resolution to the U.S.-China trade saga.

“If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices,” UBS oil analyst Giovanni Staunovo said in a note analysing oil market trends for 2020.

“On the other hand, unexpected supply disruptions in the Middle East or a surprise production cut by OPEC and its allies may push oil prices higher.”

U.S. crude and product inventories fell last week, with crude drawing down for a third consecutive week despite a jump in imports, the Energy Information Administration (EIA) said.

Crude stocks dropped 4.8 million barrels, nearly double analyst expectations, to 423 million barrels, their lowest level since October last year.

Oil prices on Thursday soared more than 2% after the EIA report, though they gradually trimmed gains on investor doubts over the chances that the trade talks will yield results.

“There is still no getting away from lingering demand-side concerns,” said Stephen Brennock, of oil broker PVM.

“Consequently, any looming upside potential will be built on wobbly foundations so long as the U.S. and China continue to do battle on the trade front.”

In another sign of a possible global economic slowdown, data released on Friday showed German industrial output fell unexpectedly in July, putting Europe’s biggest economy at risk of falling into recession in the third quarter.

European markets slipped from one-month highs and the upbeat mood brought on by potential U.S.-China trade talks seemed to fade as markets awaited U.S. jobs data later on Friday.

Oil prices fall as trade tensions hit demand outlook

SINGAPORE/TOKYO (Reuters) – Oil prices fell on Monday amid renewed global economic growth concerns after U.S. President Donald Trump vowed to escalate the trade war with China with more tariffs, which would likely limit fuel demand in the world’s two biggest crude consumers.

Brent crude futures LCOc1 had dropped 92 cents, or 1.5%, to $60.97 a barrel by 0640 GMT.

U.S. West Texas Intermediate (WTI) crude futures CLc1 declined 73 cents, or 1.3%, to $54.93 a barrel.

Both crude benchmarks fell last week, with Brent down 2.5% and U.S. crude falling 1%.

Asian equity markets dropped to a six-month low on Monday while gold prices climbed as investors sought safe-haven assets because of the ratcheting up of the trade dispute between China and the United States, the world’s two largest economies.

“Crude oil futures experienced significant headwinds as global risk appetites remain feeble over subdued global growth and a sudden escalation in the Sino-U.S. trade dispute,” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.

Trump last week said he would impose a 10% tariff on $300 billion of Chinese imports starting on Sept. 1 and said he could raise duties further if China’s President Xi Jinping failed to move more quickly toward a trade deal.

The announcement extends U.S. tariffs to nearly all imported Chinese products. China on Friday vowed to fight back against Trump’s decision, a move that ended a month-long trade truce.

On Monday, China let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing may tolerate further currency weakness because of the trade dispute.

The 1.4% drop in the yuan came after the People’s Bank of China (PBOC) set the daily mid-point of the currency’s trading band at its weakest level since December 2018.

A lower yuan would raise the cost of China’s dollar-denominated oil imports. It is the world’s biggest crude oil importer.

Signs of rising oil exports from the United States also pressured prices on Monday. U.S. shipments surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, U.S. Census Bureau data showed on Friday.

The trade war and rising supply should accelerate the trend of speculators reducing their bullish positions in the WTI futures markets.

Speculators cut bullish wagers on U.S. crude in the week to July 30, while bearish wagers rose to their highest since February, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday

However, speculators increased their bullish positions in Brent futures.

Also in the United States, the weekly oil rig count, an indicator of future production, fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.

Iran’s seizure of an Iraqi oil tanker raised some concerns about potential Middle East supply disruptions in the Gulf. Iran’s state media reported on Sunday the Iranian Revolutionary Guards seized the ship for smuggling fuel.

Reporting by Roslan Khasawneh in SINGAPORE and Aaron Sheldrick in TOKYO; Editing by Joseph Radford and Christian Schmollinger

Oil advances amid concerns in the Middle East, but weak demand outlook caps gains

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KEY POINTS
  • Brent crude futures rose 17 cents, or 0.27%, to $63.35 a barrel by 0300 GMT, after dropping 1% overnight – the first fall in four sessions.
  • U.S. West Texas Intermediate crude were up 18 cents, or 0.3%, at $56.06 a barrel, having dropped 1.6% in the previous session.
Reusable: Texas oil production fracking worker cleans off truck 150204
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
Getty Images

Oil prices edged higher on Thursday amid lingering Middle East tensions and after U.S. crude stocks dropped more than expected, but gains were stemmed by a fragile demand outlook amid more signs of slowing global economic growth.

Brent crude futures rose 17 cents, or 0.27%, to $63.35 a barrel by 0300 GMT, after dropping 1% overnight – the first fall in four sessions.

U.S. West Texas Intermediate crude were up 18 cents, or 0.3%, at $56.06 a barrel, having dropped 1.6% in the previous session.

“We see it as a current tug of war between the bull case of OPEC production cuts, political risk in the Gulf and the recent reduction in crude inventories, versus the bear case of slowing global growth and a ramp-up in U.S. production,” said Hue Frame, managing director at Frame Funds in Sydney.

“We think the Middle East tensions will more than likely exist for the foreseeable future. While they exist, the tug of war will more likely continue in the crude market until the economic data either deteriorates further or rebounds.”

Meanwhile, U.S. crude stocks fell by nearly 11 million barrels last week, way more than analysts’ expectations for a drop of 4 million barrels.

But oil output from seven major shale formations in the United States is expected to rise in August to a record 8.55 million barrels per day.

The overall sentiment in the oil market has darkened as investors worry that slowing global economic growth will weaken demand for oil.

A series of purchasing manager index readings in the United States and Europe were weaker than expected, confirming concerns about slower economic growth amid a trade war between the United States and China.

“Global growth concerns are driving energy prices lower as forecasts keep getting downgraded even as the U.S. will be sending a trade team to China next week,” Alfonso Esparza, senior market analyst at OANDA, said in a note.

Set against those worries are ongoing tensions in the Middle East following the seizure of a British-flagged tanker in the Gulf by Iranian forces last week.

The military adviser to Iran’s supreme leader was quoted on Wednesday as saying that any change in the status of the Strait of Hormuz, which Tehran says it protects, would open the door to a dangerous confrontation.

Britain, meanwhile, gained initial support from France, Italy and Denmark for its plan for a European-led naval mission to ensure safe shipping in the Gulf.

Correction: An earlier version of this Reuters article incorrectly described the change in U.S. crude inventories. It was, in fact, a drop of nearly 11 million barrels last week.

Crude futures firm as US stockpiles of oil products gain

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KEY POINTS
  • Brent crude futures were up 13 cents, or 0.2%, at $63.80 a barrel by 0237 GMT. They fell 1.1% on Wednesday.
  • U.S West Texas Intermediate crude futures were down 1 cent at $56.77. The U.S. benchmark dropped 1.5% in the previous session.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices steadied on Thursday after falling in the previous session when official data showed U.S. stockpiles of products like gasoline rose sharply last week, suggesting weak demand during the peak driving season.

Brent crude futures were up 13 cents, or 0.2%, at $63.80 a barrel by 0237 GMT. They fell 1.1% on Wednesday.

U.S West Texas Intermediate crude futures were down 1 cent at $56.77. The U.S. benchmark dropped 1.5% in the previous session.

Oil prices have fallen this week as worries over a Middle East conflict have eased, oil production in the Gulf of Mexico has resumed after a storm and worries have emerged over Chinese economic growth.

The “easing of tensions between the U.S. and Iran, mixed Chinese growth data and storm-hit operations getting back online are all pressuring oil prices downward, ” said Alfonso Esparza senior market analyst at OANDA.

Japan’s exports fell for a seventh straight month in June, with shipments to China falling more than 10%, while Japanese manufacturers’ business confidence fell to a three-year low.

On the oil supply front, data on Wednesday from the U.S. Energy Information Administration showed a larger-than-expected draw down in crude stockpiles last week, but traders focused on large builds in refined product inventories dragging prices down.

U.S. crude inventories fell 3.1 million barrels, the EIA said, more than analysts’ forecasts for a decrease of 2.7 million barrels.

However, gasoline stocks rose 3.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel drop. Distillate stockpiles grew by 5.7 million barrels, much more than expectations for a 613,000-barrel increase, the EIA data showed.

“Gasoline consumption is painfully weak given U.S. consumers are in peak driving season,” said Stephen Innes, managing partner at Vanguard Markets.

Crude production was disrupted last week by Storm Barry, which came ashore on Saturday in central Louisiana as a Category 1 hurricane, the first major storm to hit the U.S. Gulf of Mexico this season.

More than half of daily crude production in the Gulf of Mexico remained offline by Tuesday, as most oil companies were re-staffing facilities to resume production.

The market shrugged of another incident involving a tanker in the Middle East amid tensions between the United States and Iran.

U.S. officials say they are unsure whether an oil tanker towed into Iranian waters was seized by Iran or rescued after facing mechanical faults as Tehran asserts, creating a mystery at a time of high tension in the Middle East.

Oil prices drop amid slowing global economy, trade disputes

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Reuters

KEY POINTS
  • Brent crude futures were down 21 cents, or 0.3%, at $63.90 a barrel by 0343 GMT. They fell 12 cents on Monday.
  • U.S. West Texas Intermediate crude futures were down 25 cents, or 0.4%, at $57.41 a barrel. They rose 15 cents in the previous session.
Reusable: Texas oil production fracking worker cleans off truck 150204
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
Getty Images

Oil fell on Tuesday amid worries over the outlook for demand after the latest signs that international trade disputes have been dragging on the global economy, although the potential for conflicts in the Middle East offered support to prices.

Brent crude futures were down 21 cents, or 0.3%, at $63.90 a barrel by 0343 GMT. They fell 12 cents on Monday.

U.S. West Texas Intermediate crude futures were down 25 cents, or 0.4%, at $57.41 a barrel. They rose 15 cents in the previous session.

Oil prices are being pressured by ongoing worries about demand as the U.S.-China trade war, heading into its second year, dampens prospects for global economic growth, which strongly impacts oil demand growth. The countries are the world’s two largest oil consumers.

Japan’s core machinery orders fell by the most in eight months, data showed on Monday, in a sign the global trade tensions are taking a toll on corporate investment.

Japanese government figures on Tuesday also showed that real wages in the country fell for a fifth straight month. The country is the fourth-largest crude user in the world.

“The weaker global economic outlook is keeping oil prices under downward pressure, but tensions in the Middle East are enhancing awareness to possible supply risk and should keep a floor under oil in the medium term,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Iran on Monday threatened to restart deactivated centrifuges and step up its enrichment of uranium to 20% in a move that further threatens the 2015 nuclear agreement that Washington abandoned last year.

Washington has imposed sanctions that eliminate benefits Iran was meant to receive in return for agreeing to curbs on its nuclear program under the 2015 deal with world powers.

The confrontation has brought the United States and Iran close to conflict. Last month, U.S. President Donald Trump called off air strikes at the last minute in retaliation for Iran shooting down a U.S. drone over the Gulf, which followed attacks on two oil product tankers in the nearby Gulf of Oman by unidentified assailants.

Meanwhile, Goldman Sachs said growth in U.S. shale production was likely to outpace that of global demand at least through 2020, limiting gains in oil prices despite output curbs led by the Organization of the Petroleum Exporting Countries.

Industry and government data for release later on Tuesday and on Wednesday is expected to show that U.S. crude stockpiles fell for a fourth consecutive week, dropping 3.6 million barrels, according to a preliminary Reuters poll.