Oil markets ease after three days of gains

An oil tanker is being loaded at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. The kingdom is temporarily halting oil shipments through the Red Sea shipping lane of Bab Al-Mandab. (Reuters)
Updated 27 July 2018
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Oil markets ease after three days of gains

TOKYO: Oil prices edged lower on Friday in quiet trading after three days of gains, but took support from Saudi Arabia halting crude transport through a key shipping lane, falling US inventories and easing trade tensions between Washington and Europe.
Brent futures were down 5 cents at $74.49 a barrel by 0319 GMT, after gaining 0.8 percent on Thursday. They are heading for a near 2 percent gain this week, the first weekly increase in four.
US West Texas Intermediate futures were 5 cents lower, at $69.56, after rising nearly 0.5 percent in the previous session. The contract is heading for a 1.3 percent weekly loss, a fourth week of declines.
Saudi Arabia said on Thursday it was “temporarily halting” oil shipments through the Red Sea shipping lane of Bab Al-Mandab after an attack by Yemen’s Iran-aligned Houthi movement.
Any move to block the Bab Al-Mandeb, which is between the coasts of Yemen and Africa at the southern end of the Red Sea, would virtually halt oil shipments through Egypt’s Suez Canal and the SUMED crude pipeline that link the Red Sea and Mediterranean.
“The fundamentals of the oil market haven’t really changed. We will have sporadic news coming out of the more volatile regions every now and again, but the market is still oversupplied,” said Peter Lee, Asian oil and gas analyst at BMI Research in Singapore.
“The picture is getting a little better but it is not going to be until 2019 when we start to see more material signs of a deficit building in the market,” he said. “We expect to see range-bound trading till the end of the year.”
An estimated 4.8 million barrels per day of crude oil and refined products flowed through the Bab Al-Mandeb strait in 2016 toward Europe, the United States and Asia, according to the US Energy Information Administration.
However, Saudi Arabia has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export. That could offset a bottleneck caused by Bab Al-Mandeb’s closure.
US President Donald Trump and Jean-Claude Juncker, president of the European Commission, the EU’s executive body, struck a surprise deal on Wednesday that ended the risk of an immediate trade war between the two powers.
A trade war would likely hit demand for commodities like oil, which is used heavily in shipping, construction and other economic activity.
US crude oil inventories last week tumbled more than expected to their lowest level since 2015, the EIA said on Wednesday, as US gasoline and distillate stockpiles fell.


US-China trade deal hopes grow as oil prices decline

Updated 30 min 5 sec ago
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US-China trade deal hopes grow as oil prices decline

  • Data suggested a smaller-than-expected fall in American crude inventories
  • Preparations underway for Donald Trump to meet Xi Jinping next week at the G20 summit in Osaka

LONDON: Oil prices declined on Wednesday as data suggested a smaller-than-expected fall in American crude inventories, as hopes for a US-China trade deal continue to grow.
Brent crude futures were down 51 cents at $61.72 a barrel.
US West Texas Intermediate crude fell 25 cents to $53.65 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.
After weeks of swelling, US crude stocks fell by 812,000 barrels last week to 482 million, the American Petroleum Institute said on Tuesday, a smaller fall than the 1.1-million-barrel drop analysts had expected.
Official estimates on US crude stockpiles from the US government’s Energy Information Administration are due during afternoon trading.
US President Donald Trump offered some support, saying preparations were underway for him to meet Chinese President Xi Jinping next week at the G20 summit in Osaka, Japan, amid hopes a trade deal could be thrashed out between the two powers. Trump has repeatedly threatened China with tariffs since winning office in 2016.
European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that he would ease policy again if inflation failed to accelerate.
Tensions remain high in the Middle East after last week’s tanker attacks. Fears of a confrontation between Iran and the US have mounted, with Washington blaming Tehran, which has denied any role.
Trump said he was prepared to take military action to stop Iran having a nuclear bomb but left open whether he would approve the use of force to protect Gulf oil supplies.
On Wednesday, oil markets shrugged off a rocket attack on a site in southern Iraq used by foreign oil companies.
“It is interesting to note that the crude oil futures market could not rally on hawks planting bombs in the Strait of Hormuz but could rally on doves planting quantitative easing,” Petromatrix’s Olivier Jakob said in a note.
“This is an oil market that doesn’t know how to react when an oil tanker blows up but knows how to react when the head of a central bank makes some noise.”
Members of the Organization of the Petroleum Exporting Countries have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.