Oil prices fall as US stockpiles rise, but Middle East tensions support

The UAE-flagged A. Michel, one of the four tankers damaged in alleged ‘sabotage attacks,’ off the coast of Fujairah in this photo released by the Emirati National Media Council. (Emirati National Media Council/AFP)
Updated 15 May 2019
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Oil prices fall as US stockpiles rise, but Middle East tensions support

  • US crude stockpiles unexpectedly rose last week, data from industry group the American Petroleum Institute show
  • Armed drones struck two of Saudi Arabia’s oil pumping stations, days after the sabotage of oil tankers near the UAE

TOKYO: Oil fell on Wednesday after data showed a surprise rise in US crude stockpiles and as Chinese industrial output grew less than expected in April, but prices were supported by mounting tensions in the Middle East.
Brent crude futures were at $71.06 a barrel at 0646 GMT, down 18 cents, or 0.3 percent, from their last close. Brent ended 1.4 percent higher on Tuesday.
US West Texas Intermediate (WTI) crude futures were at $61.33 per barrel, down 45 cents, or 0.7 percent, from their previous settlement. WTI closed up 1.2 percent in the previous session.
US crude stockpiles unexpectedly rose last week, while gasoline and distillate inventories increased, data from industry group the American Petroleum Institute showed on Tuesday.
Crude inventories climbed by 8.6 million barrels in the week to May 10 to 477.8 million, compared with analyst expectations for a decrease of 800,000 barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.1 million barrels, the API said.
The US Energy Department’s Energy Information Administration (EIA) reports official numbers later on Wednesday.
“If the EIA report confirms a strong build we could see that weigh on oil prices ... but too many geopolitical risks remain that should keep prices supported,” Edward Moya, senior market analyst at OANDA told Reuters by email.
Oil prices have drawn support after Saudi Arabia on Tuesday said armed drones struck two of its oil pumping stations, two days after the sabotage of oil tankers near the United Arab Emirates, while the US military said it was braced for “possibly imminent threats to US forces in Iraq” from Iran-backed forces.
The attacks took place against a backdrop of US-Iranian tension following Washington’s decision this month to try to cut Iran’s oil exports to zero and to beef up its military presence in the Gulf in response to what it said were Iranian threats.
Meanwhile, the Organization of the Petroleum Exporting Countries on Tuesday said that world demand for its oil would be higher than expected this year as supply growth from rivals including US shale producers slows. That points to a tighter market if the exporter group refrains from raising output.
Elsewhere, growth in China’s industrial output slowed more than expected to 5.4 percent in April from a 4-1/2 year high in March, reinforcing views that Beijing will have to roll out more stimulus measures as a trade war with the United States intensifies.
US President Donald Trump on Tuesday called the trade war with China “a little squabble” and insisted talks between the world’s two largest economies had not collapsed.
“I think the markets are anxiously awaiting trade progress since the political damage of a catastrophic end of talks could cost President Trump re-election in 2020,” Moya said.
“Trump is motivated to make a deal happen and we should see a framework agreement reached by the G20 summit (next month),” he said.


UK inflation rises in April by less than Bank of England expected

Updated 22 May 2019
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UK inflation rises in April by less than Bank of England expected

  • Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March
  • Electricity and gas prices were the biggest driver of inflation last month

LONDON: British inflation rose last month by less than the Bank of England and investors had expected, but still hit its highest level this year, pushed up by a rise in energy bills.
Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2 percent, the same as the BoE’s forecast.
Sterling and government bonds were little changed by the data as core inflation, which excludes energy and food prices, held steady at 1.8 percent for the third month in a row.
“In principle, this is another reason to think the Bank of England will keep rates on hold for the foreseeable future,” ING economist James Smith said.
But he added that a strong labor market meant an interest rate hike in November could not be ruled out.
A recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.
But Britain’s energy regulator raised a price cap on energy providers by 10 percent with effect from April, and all big six suppliers raised their standard prices by the same amount, which the BoE said would push inflation above target briefly.
Electricity and gas prices were the biggest driver of inflation last month, the ONS said.
Computer game and package holiday prices helped to offset the impact of the higher bills.
The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.
Manufacturers’ costs for raw materials — many of them imported — were 3.8 percent higher than in April 2018, much less than the 4.5 percent rise predicted by the Reuters poll.
The ONS said house prices in March rose by an annual 1.4 percent across the United Kingdom as a whole compared with 1.0 percent in February, marking the first increase in house price inflation since September.
Prices in London alone fell by 1.9 percent, a smaller drop than in February.
The ONS also revised down its estimate for Britain’s budget deficit in the last 2018/19 financial year that ended in March.
The headline measure of public sector net borrowing amounted to £23.5 billion ($29.8 billion) that year or 1.1 percent of gross domestic product, compared with the previous estimate of £24.7 billion or 1.2 percent of GDP.
In April, the first year of the 2019/20 financial year, the deficit stood at £5.8 billion, as expected by economists.