Oil soars on easing U.S.-China trade tensions

Marco Green
August 14, 2019

A deepening trade war between the USA and China, the world's two largest economies and energy consumers, has weighed heavily on oil prices in recent months.

A view of an oil refinery off the coast of Singapore March 14, 2008.

The Chinese products include laptops and cellphones.

Oil prices fell on Monday amid worries about a global economic slowdown and the ongoing US -China trade war, which has reduced demand for commodities such as oil.

But with about $110 billion worth of Chinese imports still subject to the tariffs increase next month, the delay will not solve the core issues between the USA and China, said Yang. "Any glimmer of hope revives the prospects for a more positive demand landscape", said John Kilduff, partner at energy hedge fund Again Capital Management in NY.

That put Brent futures on track for their biggest daily percentage gain since December.

China's commerce ministry said in a statement on Tuesday that US and Chinese trade officials spoke on the phone and agreed to talk again within two weeks. The global benchmark has lost more than 20% since hitting its 2019 high in April.

Oil prices fell on Tuesday on lingering concerns over global demand and rising U.S. production, though expectations for major producers to further curtail output offered support.

This is the fourth straight day of gains for the oil prices-the previous gain helped along by Saudi Arabia's chat with other Organisation of Petroleum Exporting Countries (OPEC) producers about what additional steps the group could take to stanch the price bleed that sought to undermine not only Saudi Arabia's budget which relies heavily on oil, but its much-anticipated public listing of its crown jewel, Saudi Aramco.

"With Saudi Aramco reportedly eyeing an IPO once again, there is some support to the idea that Saudi Arabia has a heightened interest in strong crude prices and will cut its own output accordingly", Vienna-based consultancy JBC Energy said.

United States oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September to a record 8.77 million bpd, the Energy Information Administration forecast in a report.

"We believe that OPEC needs to cut by a further one million barrels per day in 2020 if they are to defend oil prices at $60 a barrel".

Crude inventories increased by 3.7 million barrels to 443 million, compared with analyst expectations for a decrease of 2.8 million barrels, the API said.

"If we get the drawdown in (U.S.) inventory that most people are looking for, that is going to get the market a lot tighter", said Flynn at Price Futures.

Data from industry group the American Petroleum Institute (API) showed US crude stocks unexpectedly rose last week.

Other reports by Click Lancashire

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