London: Signs of easing tensions between the world’s two largest economies have done little to lift oil as surging US stockpiles offset potential gains in crude futures.
West Texas Intermediate crude for September delivery gained 24 cents to $65.25 a barrel on the New York Mercantile Exchange at 1:53pm in London. The contract slumped $2.03 Wednesday to $65.01. Average volume traded Thursday was about 22 per cent below the 100-day average.
Brent for October settlement rose 47 cents to $71.23 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $1.70 to $70.76 on Wednesday, capping a decline of more than 5 per cent since the middle of last week. The global benchmark crude traded at a $6.49 premium to US benchmark WTI for the same month.
A breakdown in negotiations between the US and China two months ago stoked concern that global economic growth could slow, potentially curbing energy consumption. A standoff between the US and Turkey subsequently sparked fears of contagion among emerging markets. A surprise gain in US oil inventories last week has also weighed on crude futures.
“The weekly US inventory report from EIA has been the main driver of oil prices over the (past) day,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S. “Inventories rose more than expected and reported by API on Tuesday which pushed both Brent and WTI lower yesterday.”
China will dispatch Vice Commerce Minister Wang Shouwen to the US in late August for low-level trade talks in the first official exchanges since negotiations broke down. The two nations had appeared to have reached a deal in May, but US President Donald Trump backed away from the agreement a few days later. Washington and Beijing have since been locked in a trade standoff as each slapped tariffs on billions of dollars of each other’s goods.
This revival in trade talks “could give support to oil prices if it leads to a substantial turn around in sentiment around the global trade war,” Pedersen said.
Meanwhile, an unexpected gain in US crude inventories weighed on prices. Nationwide stockpiles rose by 6.81 million barrels last week, the most since 2017, while those at the Cushing storage hub in Oklahoma expanded for the first time since May.