Oil holds near $63 as crude stocks drop, trade tensions abate
SEOUL and LONDON (Bloomberg) -- Oil held near $63.bbl after U.S. crude stockpiles declined and trade tensions between the U.S. and China showed tentative signs of easing.
Futures were little changed in New York. U.S. oil inventories shrank the most since January, according to government data Wednesday, in contrast to a forecast expansion. Risk assets, including equities, rallied as Chinese and American officials indicated they’re willing to negotiate on escalating frictions, helping to calm fears that a trade war could derail the strongest global growth in years.
The decline in U.S. stockpiles has boosted optimism that surging shale output may not thwart OPEC’s efforts to drain a glut. While prices have been buoyed by America’s potential withdrawal from a nuclear deal with OPEC producer Iran, a gathering trade conflict between the U.S. and China -- the world’s two largest economies -- has kept a lid on gains.
Prices are being affected by “a bullish oil-inventory report” from the U.S., said Michael Poulsen, an analyst at Global Risk Management.
WTI for May delivery fell $0.04 to $63.33/bbl on the New York Mercantile Exchange, after dropping $0.14 on Wednesday. Total volume traded Thursday was about 23% below the 100-day average.
Brent for June settlement declined $0.02 to $68/bbl on the London-based ICE Futures Europe exchange, after slipping $0.10 on Wednesday. The global benchmark crude traded at a $4.70 premium to June WTI.
U.S. storage dropped by 4.62 MMbbl to 425.3 MMbbl last week, while outbound shipments of crude expanded to a record, according to an EIA report Wednesday. The EIA data also showed that American oil production rose to an unprecedented 10.5 MMbpd, topping the 10 MMbbl level for a ninth week.
Global markets from equities to oil recovered after investor optimism grew that the U.S. and China will step back from the brink of a trade war. The Asian nation said Wednesday it would levy an additional 25% tariff on about $50 billion of U.S. imports, following which the White House National Economic Council Director Larry Kudlow spent much of the day trying to calm markets.
The two countries still have time to work out their differences, he said, while China’s ambassador to the U.S., Cui Tiankai, also said his first choice would be to consult the U.S. over trade.
Oil Market News
Proposed tariffs on China’s imports of American propane probably won’t hurt U.S. companies as much as intended, since Chinese buyers signed long-term contracts that include high fees for breaking the agreements. Kazakhstan’s cash-strapped state oil company generated another $1 billion in prepayments by extending a crude-supply contract with Vitol Group. Gasoline futures fell 0.2% to $1.9726 a gallon, after adding 0.1% Wednesday.
