Oil Slides on Prospect of Easing Geopolitical Risk, More Supply
(Bloomberg) -- Oil slid for a second day as the U.S. raised hopes of easing tensions with OPEC member Iran, while President Donald Trump’s threat of new tariffs on China rekindled fears about demand.
Futures declined 3.3% in New York on Tuesday, adding to Monday’s 1.1% drop. U.S. Secretary of State Mike Pompeo said Iran, which has been hit by American sanctions over its weapons program, had signaled an openness to talks. The Islamic Republic’s foreign minister made similar comments, offering the first hint of a diplomatic solution since the Trump announced plans in May 2019 to squeeze Iranian oil exports.
Meanwhile, in the U.S., the industry-funded American Petroleum Institute reported U.S. distillate stockpiles rose by 6.23 million barrels last week. That would be the largest build since January if Energy Information Administration data confirms it on Wednesday.
At the same White House meeting where Pompeo spoke, President Donald Trump reiterated that he could impose additional tariffs on Chinese imports, despite promising to hold off on more duties in a trade-war truce he reached with China’s Xi Jinping last month. U.S. equities markets retreated as well on the prospect that the spat between the world’s two top economies could persist.
The recent declines have scuppered a month-long oil rally, with fears about global demand and surging U.S. shale supplies reemerging. Crude’s also lost some of the uplift from Hurricane Barry, which shuttered almost three-quarters of Gulf of Mexico output over the weekend. Explorers and refiners along the Gulf coast have begun returning employees to work as the storm moves inland.
“Bullish catalysts are in short supply,” analysts at London-based broker PVM Oil Associates Ltd. said in a note to clients. “The Gulf Coast of Mexico hurricane premium is fading as offshore operations in the region resume. At the same time, the U.S. shale engine continues to give oil bulls a sleepless night.”
August West Texas Intermediate oil traded at $57.63 a barrel at 4:43 p.m. in New York after settling at $57.62 a barrel on the New York Mercantile Exchange, its steepest decline since July 2. Brent futures for September settlement declined $2.13 to $64.35 on the ICE Futures Europe Exchange in London. The global benchmark crude was at a premium of $6.61 to WTI for the same month.
The API also reported domestic crude stockpiles fell by 1.4 million barrels, while Cushing, Oklahoma, supplies decreased by 1.12 million barrels. Gasoline inventories fell 476,000 barrels.
Royal Dutch Shell Plc and ConocoPhillips are among companies seeking to restore output at offshore platforms in the Gulf of Mexico now that weather conditions have improved. The region accounts for 16% of total U.S. crude oil production, according to the Energy Department.
The outages over the weekend are expected to show up in the next tally of American stockpiles. Analysts in a Bloomberg survey are predicting a 3 million drop in inventories last week -- a fifth straight decline -- when the government releases the data on Wednesday.
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