Oil Prices Fall Amid Trade-War Fears Despite Surprise Inventory Drop

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Gasoline inventories fell in the reporting period by 1.1 million barrels, after a weekly draw of 3.5 million barrels in the prior week, and distillate stockpiles moved higher by 500,000 barrels.

Prices had gone just above $71 per barrel early this year. Risk assets, including equities, rallied as Chinese and American officials indicated they're willing to negotiate on escalating frictions, helping to calm fears that a trade war could derail the strongest global growth in years.

Benchmark Brent prices lost $0.47 at $67.65 per barrel in late afternoon trading on Wednesday. Prices erased most of their losses on Wednesday after data showed supplies stored in US tanks shrank the most since January, in contrast to a forecast for a 2 million-barrel gain.

Analysts surveyed by Reuters had predicted a small gain in stocks.

WTI crude oil future -0.27% to $63.37/bbl at last check.

Building on the recent confrontation over the trade issue, China proposed a broad range of tariffs against United States products.

"Oil prices are profiting from the general brightening of sentiment on the markets as signs emerge that the trade dispute is easing between the US and China", analysts at Commerzbank said in a note.

Oil also got support from firm global equities, as the United States expressed willingness to negotiate a resolution on trade after proposed US tariffs on $50 billion in Chinese goods prompted a quick response from Beijing that it would retaliate by targeting key American imports.

China increased tariffs by up to 25 percent on 128 United States products from Monday, escalating a spat between the world's biggest economies in response to United States duties on imports of aluminum and steel. In a reflection of general atmosphere of nervousness, gold prices increased.

Shale oil production from the USA has been going up in the last few months as oil prices rise due to production cut agreement between Opec and non-Opec member countries and geopolitical tensions in the Middle East and elsewhere. "Hence, range bound levels are to be expected in crude oil prices for the coming weeks".

"We are now thinking about a format for co-operation which could be for the long term, which would include the possibility of market monitoring information exchange and, if needed, the implementation of some joint actions", Novak said.

Palladium lost 2.1pc to $945.75 per ounce, earlier hitting $938.22, its lowest level since October 11, and was set to fall more than 9pc this month, the steepest drop since December 2016.