Oil prices fall but set for weekly gain as trade rhetoric eases

Daniel Fowler
August 31, 2019

Crude oil rose Thursday, withstanding pressure from concerns about economic growth, while capitalizing on a sharp fall in USA inventories, Kallanish Energy reports.

On word from the EIA's report that crude stocks in fact fell last week by 10 million, Brent settled up 98 cents at $60.49 per barrel; West Texas Intermediate ended at $55.78 per barrel, rising 85 cents.

U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 10.0 million barrels during the week ending August 23 from the previous week, the U.S. Energy Information Administration (EIA) said in a report on Wednesday.

"Gasoline production increased last week, averaging 10.7 million barrels per day". Brent crude futures were 0.56 percent lower to $60.15 per barrel.

The impending Beijing 5% tariff on USA oil is particularly responsible for the recent weakness in WTI relative to Brent.

"Trade tensions (are) hanging like a dark cloud threatening to rain over oil prices", said Jeffrey Halley, senior market analyst at OANDA.

"It's simply positioning ahead of the long weekend", said Bob Yawger, futures director at Mizuho Securities USA in NY.

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"The ongoing trend of narrowing net imports has yielded a massive draw to crude stocks, with imports dropping below 6 million barrels per day, and exports jumping above 3 million barrels per day", said Matt Smith, director of Commodity Research at ClipperData. "And you're going to have another big pipeline that's going to continue to change the math".

The American Petroleum Institute (API), an industry group, has estimated a staggering crude oil inventory draw of 11.1 million barrels last week, compared with expectations for a 2-million-barrel draw.

Concerns about a slowdown in economic growth due to the U.S.

As shippers send Permian crude to the Gulf Coast instead of Cushing, "there's more competition for Cushing barrels", said Andy Lipow, president of Lipow Oil Associates in Houston.

The cartel's compliance level with the production cuts agreed in December had reached 159 percent in July thanks to Saudi Arabia's continued deeper cuts and the decline in Venezuelan and Iranian production.

Oil prices eased on Friday after three days of gains, with concerns about the state of the global economy amid the US-China trade war keeping prices in check.

San Francisco Federal Reserve President Marly Daly said on Thursday she believes the US economy has "strong" momentum, but uncertainty and a global growth slowdown are having an impact.

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