Oil prices gain as market awaits signals on U.S.-China trade talks

REUTERS

TOKYO (Reuters) – Oil prices rose on Tuesday, reversing early losses on hopes that U.S. President Donald Trump may signal progress on trade talks with China in a speech later in the day.

Brent crude futures were up 31 cents, or 0.5%, at $62.49 a barrel by 0644 GMT, after dipping to as low as $61.90 earlier in the day.

U.S. West Texas Intermediate (WTI) crude was up 23 cents, or 0.4%, at $57.09 a barrel, having fallen to $56.55.

Worries about the impact on oil demand from the fallout of the 16-month U.S.-China trade war, which has weighed on global economic growth, sent prices lower on Monday.

Trump said on Saturday that talks with China were moving along “very nicely” but the United States would only make a deal if it was the right one for Washington. He also there had been incorrect reporting about U.S. willingness to lift tariffs.

Trump speaks to the Economic Club of New York later on Tuesday, and markets will be keen for any update on the talks.

“Positive commentary about a possible U.S. and China interim trade deal certainly helps, but the fundamentals are supportive,” said Virendra Chauhan, Oil Analyst at Energy Aspects in Singapore, pointing to an improved demand outlook.

“Six million barrels per day of refining capacity is due to return from turnarounds across November and December,” he said.

On the supply side, Goldman Sachs also cut its 2020 forecast for growth in U.S. oil production, which has surged in recent years.

The investment bank cut its growth forecast for next year by 100,000 barrels per day (bpd) to 600,000 bpd over 2019.

“We expect U.S. oil growth to decelerate into 2020 as many companies look to balance growth with capex,” Goldman Sachs said.

Elsewhere, U.S. data showed that crude inventories at Cushing, the delivery point for WTI, fell about 1.2 million barrels in the week to Nov. 8, traders said, citing market intelligence firm Genscape.

Cushing inventories had grown for five weeks in a row through Nov. 1, according to government data.

Demand growth may pick up in 2020 after a year of dashed expectations amid the U.S.-China trade war, Fitch Solutions Macro Research analysts said in a new report.

“Our data show that 2019 will mark the nadir of oil demand growth over the next five years,” Fitch Solutions said.

“We forecast demand to (grow) by around 0.5% this year, rising to 0.8% in 2020,” the report said, although it added that “trade and political risks remain extremely elevated.”

Oil prices steady amid concerns of rising supplies and sluggish demand

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KEY POINTS
  • Brent crude futures were at $62.36 a barrel, down 3 cents, or 0.05%, from the previous close, by 0555 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were 2 cents lower, or 0.04%, to $56.47 a barrel.
GP: Oil tank North Dakota 190926
Photo taken August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices were steady on Thursday after falling the previous two sessions on industry concerns about rising supplies and signs of slowing demand.

Brent crude futures were at $62.36 a barrel, down 3 cents, or 0.05%, from the previous close, by 0555 GMT.

U.S. West Texas Intermediate (WTI) crude futures were 2 cents lower, or 0.04%, to $56.47 a barrel.

Brent prices have dropped 3.6% since the close on Monday, while WTI is down 3.7% over the same period, weighed down by a surprise 2.4 million-barrel build in U.S. crude inventories last week and a faster than expected recovery of Saudi production capacity after the Sept. 14 attacks on its production plants.

Prices found slight support on hopes that the U.S.-China trade dispute may ease, potentially boosting oil demand.

U.S. President Trump said on Wednesday — a day after a stinging rebuke to China for its trade practices — that Beijing wanted to make a deal “very badly” and that a deal “could happen sooner than you think.”

Trump and Japanese Prime Minister Shinzo Abe also signed a limited trade deal that would open up Japanese markets to some $7 billion worth of U.S. products annually.

Aside from that, analysts said there was little to help lift crude futures higher.

“There’s not too much to be cheery about on oil markets today,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

“Saudi Arabia is restoring production much faster than expected (and) the EIA crude inventories came in higher,” said Halley.

Both Brent and WTI on Wednesday fell to their lowest since the attacks on Saudi Arabia.

Crude futures were also pressured by sluggish economic data in leading European economies and Japan, analysts said.

“Fundamentally, a much weaker than expected Germany manufacturer PMI data painted a tepid outlook for energy demand,” said Margaret Yang, market analyst at CMC Markets.

“This bearish outlook is further strengthened by a rise in U.S. crude oil stockpile in the past weeks,” said Yang.

A firmer dollar, which posted its sharpest daily gain in three months overnight and held steady in Asian trade, also weighed on oil prices as it makes dollar-traded fuel imports more costly for countries using other currencies.

“Baring new inputs to adjust price expectations, both contracts are in grave danger of fully unwinding their Saudi attack rallies and retesting their pre-attack lows, around $60.00 and $54.00 respectively,” said Halley.

Oil prices tread water as market eyes global risks

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KEY POINTS
  • Brent crude futures were down 3 cents by 0300 GMT at $64.20.
  • U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.
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Jason Reed | Reuters

Crude prices were little changed on Monday as traders weighed geopolitical risks against the impact of the Sino-U.S. trade war on the global economy, although last week’s better-than-expected U.S. jobs data offered some support.

Brent crude futures were down 3 cents by 0300 GMT at $64.20. U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.

“A very cautious open this morning supported by a better than expected (non-farm payrolls),” said Stephen Innes, managing partner at Vanguard Markets in Bangkok. “Traders remain incredibly cautious about the dimmer global economic overhang.”

Both oil benchmarks fell last week as concerns about a slowing global economy outweighed risks to supply. Brent fell more than 3% and WTI shed more than 1.5%.

U.S. job growth rebounded strongly in June, with government payrolls surging, the Labor Department’s closely watched employment report showed on Friday, suggesting May’s sharp slowdown in hiring was probably a one-off.

Employers added 224,000 jobs last month, the most in five months, the report showed.

But the U.S.-China trade war has dampened prospects of global economic growth and oil demand.

The lack of concrete progress in resolving the acrimonious trade war between the United States and China, however, means the bar could be very high for the U.S. Federal Reserve not to lower borrowing costs at its July 30-31 policy meeting.

White House Economic advisor Larry Kudlow has confirmed top representatives from the United States and China will meet in the coming week to continue trade talks.

Still, Japan’s core machinery orders fell for the first time in four months in May, posing the biggest monthly drop in eight months in a worrying sign that global trade tensions are taking a toll on corporate investment.

Oil received some support from simmering tensions over Iran and after an extension last week to output cuts by OPEC and its allies.

Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from U.S. President Donald Trump, who pulled out of the pact last year.

“Geopolitical risks remain plentiful, but the start of the week could see Iran worries ease,” said Edward Moya, senior market analyst at OANDA.

Meanwhile, U.S. energy companies this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Oil prices fall amid signs of slowing US demand, economic concerns

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Reuters

KEY POINTS
  • Front-month Brent crude futures were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.
  • U.S. West Texas Intermediate crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices fell more than 0.5% on Thursday, weighed down by data showing a smaller-than-expected decline in U.S. crude stockpiles and worries about the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.

U.S. crude inventories dropped by 1.1 million barrels last week, the Energy Information Administration (EIA) said on Wednesday. That compared with analyst expectations for a decrease of 3 million barrels.

Inventories fell less than expected as U.S. refineries last week consumed less crude than the week before and processed 2% less oil than a year ago, the EIA data showed, despite being in the midst of the summer gasoline demand season.

That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy. New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, adding to the economic concerns.

The weak U.S. data followed a report of slow business growth in Europe last month as well.

“Tossing aside the short-term nature of fluctuations around the inventory data, it’s impossible to escape the economic reality that we are in the midst of a global manufacturing downturn,” said Stephen Innes, managing partner, Vanguard Markets.

The weakness in oil was offset slightly by the outlook for global supplies.

U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Drillers cut five oil rigs in the week to July 3, bringing the total count down to 788, General Electric Co’s GE.N Baker Hughes energy services firm said in its closely followed report on Wednesday.

Global supply is also expected to contract as the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil production cuts until March 2020.

Oil prices fall as U.S. rig count rise, trade concerns

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  • Both U.S. and Brent crude futures slipped.
  • In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices fell by around 1 percent on Monday as drilling activity in the United States, the world’s largest oil producer, picked up and financial markets were pulled down by trade concerns.

A refinery fire in the U.S. state of Illinois, which resulted in the shutdown of a large crude distillation unit, that could cause crude demand to fall also weighed on prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $52.09 per barrel at 0347 GMT, down 63 cents, or 1.2 percent, from their last settlement.

International Brent crude oil futures were down 49 cents, or 0.8 percent, at $61.61 a barrel.

In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Companies added seven oil rigs in the week to Feb. 8, bringing the total count to 854, pointing to a further rise in U.S. crude production, which already stands at a record 11.9 million bpd.

WTI prices were also weighed down by the closure of a 120,000-barrels-per-day (bpd) crude distillation unit (CDU) at Phillips 66’sWood River, Illinois, refinery following a fire on Sunday.

Elsewhere, the head of Russian oil giant Rosneft, Igor Sechin, has written to the Russian President Vladimir Putin saying Moscow’s deal with the Organization of the Petroleum Exporting Countries (OPEC) to withhold output is a strategic threat and plays into the hands of the United States.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June.

OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact.

Analysts said economic concerns were also weighing on crude oil futures.

Vandana Hari of Vanda Insights said in a note that crude prices were dragged down “as China returned from a week-long Lunar New Year holiday and regional stock markets plunged into the red amid resurgent concerns over the U.S.-China trade dispute.”

Trade talks between the Washington and Beijing resume this week with a delegation of U.S. officials travelling to China for the next round of negotiations. The United States has threatened to increase tariffs already imposed on goods from China on March 1 if the trade talks do not produce an agreement.

Preventing crude prices from falling further have been U.S. sanctions on Venezuela, targeting its state-owned oil firm Petroleos de Venezeula SA (PDVSA).

“The issues in Venezuela continue to support prices. Reports are emerging that PDVSA is scrambling to secure new markets for its crude, after the U.S. placed additional sanctions on the country,” ANZ bank said on Monday.