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Oil holds gain as traders weigh trade against US stockpiles

Apr 11 2018 09:36
Tsuyoshi Inajima, Bloomberg

Tokyo - Oil held gains above $65 a barrel as investors weigh easing trade tensions between the world’s two biggest economies against concerns over rising US crude stockpiles.

Futures in New York were little changed after climbing the most in eight months on Tuesday. President Donald Trump praised conciliatory remarks from Chinese counterpart Xi Jinping that signalled Beijing wants to defuse a trade dispute that had been roiling global markets.

Investors now await a key government report on US crude inventories after industry data was said to show a gain in stockpiles.

Oil has seesawed this year as record output from American producers offsets cuts by the Organisation of Petroleum Exporting Countries and its allies aimed at eliminating a global oversupply. Focus this year has been on US crude inventory data for signs on whether the OPEC cuts are working or if the producer group needs to extend their deal.

“Oil is maintaining yesterday’s upward direction as investors increasingly expect a trade spat between the US and China will ease,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National, said by phone from Tokyo. Still, “data suggesting rising US inventories is weighing on prices.”

Following gains

West Texas Intermediate for May delivery was at $65.36 a barrel on the New York Mercantile Exchange, down 15 cents at 3:48 pm in Tokyo. Prices climbed $2.09 to $65.51 on Tuesday, the biggest jump since late July. Total volume traded was about 18% above the 100-day average.

Brent for June settlement was at $70.76 a barrel on the London-based ICE Futures Europe exchange, down 28c. The contract climbed $2.39 to close at $71.04 on Tuesday. The global benchmark crude traded at a $5.49 premium to June WTI.

Yuan-denominated futures for September delivery rose 0.9% to 417.1 yuan a barrel on the Shanghai International Energy Exchange. The contract climbed 2.8% to 413.5 yuan on Tuesday.

Prices jumped on Tuesday after China’s Xi pledged a “new phase of opening up” in a long-planned speech that was closely watched by traders for any response to Trump’s plan to hit hundreds of Chinese products with duties.

The US President praised Xi’s “kind words” on trade.

Stockpile concerns

Also in the US, crude inventories increased by 1.76 million barrels last week, the American Petroleum Institute was said to report. That compares with a 1.25 million-barrel decrease estimated in a Bloomberg survey before the Energy Information Administration’s data on Wednesday.

Meanwhile, in the Middle East, Saudi Arabia was said to signal its ambition for higher prices. The world’s biggest oil exporter wants to get oil prices near $80 a barrel to pay for the government’s crowded policy agenda and support the valuation of state energy giant Aramco before an initial public offering, Bloomberg reported Tuesday.

Saudi Arabia, OPEC’s de facto leader, is also continuing to cut supplies to drain a glut and prop up prices. The Arab nation will keep crude exports below 7 million barrels a day in May for a 12th month even though nominations from buyers were higher than a month earlier, according to the energy ministry.

Other oil-market news:

• Eurocontrol, an air traffic agency in Europe, asked airlines to apply caution on flights to the eastern Mediterranean region because of possible air strikes in Syria over the next 72 hours.

• The S&P 500 energy index rose as much as 4.1% on higher crude prices.

• US oil and gas producers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford in Texas.

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commodities  |  markets  |  oil
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