Oil stuck in Trump slump as risk aversion damps U.S. supply drop
LONDON (Bloomberg) -- Oil is getting ensnared in the turmoil surrounding Donald Trump even as U.S. crude production, which has undercut OPEC’s output curbs, declined for the first time in 13 weeks.
Futures decreased as much as 2.1% in New York, as investors across financial markets fled risky assets while Trump faces the biggest crisis of his presidency over a series of damaging revelations. That’s countering optimism after U.S. data showed stockpiles last week fell for a sixth straight week and crude production ended the longest stretch of gains since 2012.
Investors across markets have been rattled by the political uncertainty. OPEC and its partners are scheduled to meet next week to decide if production curbs will be extended beyond June. While Saudi Arabia and Russia have said they’re in favor of prolonging them to March next year, that may mean they lose even more market share to producers like Nigeria and Libya that are exempt, according to Saxo Bank.
“The impact of the Trump revelations is a short-term risk skewed to the downside,” said Ole Hansen, head of commodities strategy at Saxo Bank in Copenhagen. “The failure to break new highs in response to a bullish inventory report on Wednesday could indicate that we have rallied as far as we can ahead of next week’s OPEC meeting.”
WTI for June delivery dropped as much as $1.02 to $48.05/bbl and was at $48.22 on the NYME in London. Prices gained $0.41 to settle at $49.07 on Wednesday, the highest level since April 28. Total volume traded was about 55% above the 100-day average.
Brent for July settlement fell $0.92 to $51.29/bbl on the Europe exchange. The contract gained $0.56, or 1.1%, to close at $52.21 on Wednesday. Brent traded at a $2.74 premium to July WTI.
U.S. crude stockpiles declined 1.75 MMbbl to 520.8 MMbbl last week, down from a record 535.5 MMbbl at the end of March, according to the EIA. The nation’s oil production dropped to 9.3 MMbpd, EIA data released Wednesday show.
European and Asian equity markets slumped in the wake of the worst day in eight months for U.S. stocks, following reports that Trump asked former FBI director James Comey in February to halt an investigation into Russia’s interference in the 2016 presidential election. Comey was fired last week.
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Venezuela, the oil-rich Latin American nation that signed up to OPEC’s supply cuts, has reduced production more than any other member in the past year. Algeria is optimistic about next week’s meeting in Vienna and the possibility of OPEC and non-OPEC extending the production deal, Algerian Energy Minister Noureddine Boutarfa said in Moscow after talks with his Russian counterpart Alexander Novak.
Iraq is on track for what may be the country’s highest monthly crude exports even as the Middle East nation supports moves to extend OPEC-led production cuts aimed at trimming bloated global inventories. Saudi Arabia’s crude oil exports rose 4% from a month earlier to 7.232 MMbpd in March while output fell 1.1 %, according to the Joint Organizations Data Initiative.
