Oil Bounces After Trump Says China Deal Still On



Oil Bounces After Trump Says China Deal Still On
Oil pared its decline from a three-month high as investors turned their attention back to improving demand and easing supply after the market was momentarily roiled by U.S.-China trade confusion.

(Bloomberg) -- Oil pared its decline from a three-month high as investors turned their attention back to improving demand and easing supply after the market was momentarily roiled by U.S.-China trade confusion.

Futures in New York recovered most of its earlier losses after President Donald Trump said the trade deal with Beijing was “fully intact” following remarks from Trade Adviser Peter Navarro that were interpreted as an end to the pact. He quickly clarified his comments. Oil has rallied in recent days above $40 a barrel as some U.S. states moved forward with the phased reopening of their economies, while physical crude prices are climbing due to cuts by Russia.

However, a Bloomberg survey is predicting U.S. stockpiles rose by 2 million barrels last week, a sign that the recovery is likely to be uneven. If confirmed by government data Wednesday, it would be a third weekly gain.

Oil has rebounded since plunging below zero in April and is now trading at levels last seen before Russia and Saudi Arabia engaged in a damaging, although short-lived, price war. The kingdom’s Energy Minister Prince Abdulaziz bin Salman said last week that OPEC+ is on track to rebalance the market, and some of the world’s largest traders are seeing a rapid recovery in demand.

“The OPEC+ supply cuts have done their work,” said Howie Lee, an economist at Oversea Chinese Banking Corp. “The upward momentum remains strong going into the end of quarter, it does seem that the market will see a supply deficit by the fourth quarter.”

Prices

  • West Texas Intermediate for August delivery was 18 cents lower at $40.55 a barrel on the New York Mercantile Exchange as of 7:50 a.m. London time after falling as much as 2.4% earlier
    • The July contract closed up 71 cents to settle at $40.46, the highest level since March 6, as it expired on Monday
  • Brent for August settlement slid 12 cents to $42.96 on the ICE Future Europe exchange after losing as much as 2% earlier
  • The three-month timespread was at a contango of 16 cents a barrel

The pandemic has been a constant source of tension between Washington and Beijing since the two countries agreed on their phase-one trade deal. In the latest developments, the U.S. imposed constraints on four more Chinese media companies, while the Asian nation blocked poultry imports from a Tyson Foods Inc. plant where hundreds of people tested positive for the virus.

However, Delta Air Lines is resuming flights to China, and New Jersey Governor Phil Murphy said that Atlantic City casinos and indoor dining will reopen statewide on July 2. The U.K. reported fewer than 1,000 new cases for the first time since its lockdown was declared March 23.

Meanwhile, derivatives contracts for Russia’s Urals grade soared to a premium of more than $2 a barrel to the Dated Brent benchmark last week, compared with a discount of about $4.50 during oil’s plunge in April. That’s the strongest level since at least 2015, according to brokers and ICE Futures Europe data.

--With assistance from James Thornhill.

To contact the reporters on this story:
Low De Wei in Singapore at dlow47@bloomberg.net;
Sharon Cho in Singapore at ccho28@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.