Oil prices climbed for the first time in three days on Wednesday, but rising supply and fears over the outlook for demand amid the U.S.-China trade war kept pressure on the market.
Brent crude futures had gained 49 cents, or 0.7 percent, to $76.40 a barrel by 0619 GMT. They fell 1.8 percent on Tuesday, at one point touching their lowest since Aug. 24 at$75.09 a barrel. U.S. West Texas Intermediate (WTI) crude futures advanced 28 cents, or 0.4 percent, to $66.46 a barrel on Wednesday. They dropped 1.3 percent the day before, after hitting their lowest since Aug. 17 at $65.33 a barrel.
Both crude benchmarks have fallen about $10 a barrel from four-year highs reached in the first week of October, and are on track to post their worst monthly performance since July 2016. “Everyone thought we were going to go into the $90s, but now we are heading for the $60s,” said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo, referring to Brent prices.
Oil has been caught in the global financial market slump this month, with equities under pressure from the trade scrap between the world’s two largest economies. U.S. President Donald Trump said on Monday that he thinks there will be “a great deal” with China on trade but warned that he has billions of dollars worth of new tariffs ready to go if a deal is not possible. Trump said he would like to make a deal now but that China was not ready. He did not elaborate.
The United States has already imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods. In a bearish signal, the American Petroleum Institute reported U.S. crude inventories rose 5.7 million barrels last week, more than analyst’s forecasts for a 4.1 million barrel build. Investors will look to official government data on U.S. inventories due on Wednesday.
Oil production from Russia, the United States and Saudi Arabia reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed. That is an increase of 10 million bpd since the start of the decade and means the three producers alone now meet a third of global crude demand. The United States is set to impose new sanctions on Iranian crude from next week, and exports from the Islamic Republic have already begun to fall.
Saudi Arabia and Russia have said they will pump enough crude to meet demand once the sanctions kick in. “(After the recent drop in oil prices), this is not the time to back off, if Trump wants to put the screws on Iran,” Nunan said. Imports of Iranian crude oil by major buyers in Asia hit a 32-month low in September, as China, South Korea and Japan sharply cut their purchases ahead of the sanctions on Tehran, government and ship-tracking data showed.
Sources and photo-credits: Reuters