Oil Gains as Surprise Drop in U.S. Supplies Shows Tighter Market
(Bloomberg) -- Oil prices advanced the most in more than two weeks as a surprise drop in U.S. supplies added to evidence of a tightening global market.
Futures in New York rose 1.2 percent after the Energy Information Administration said domestic crude inventories shrank by almost 4 million barrels last week, defying expectations for an increase. Imports from Saudi Arabia slipped to an all-time low, as OPEC and its allies continued to restrict output.
On Tuesday, crude prices slunk to a five-week low after President Donald Trump ratcheted up trade tensions with China by threatening new tariffs. Yet global supplies are also under pressure, with Russian exports derailed by contamination problems, and Iran and Venezuela facing American sanctions. Wednesday’s data suggested U.S. demand remains steady as well.
“It was kind of a risk-asset off market the last week with the Trump tweets and his jawboning on trade," said Nick Holmes, who helps oversee $16 billion in energy investments for Kansas-based money manager Tortoise. “So it’s good to see a constructive fundamental picture playing out on the crude side."
West Texas Intermediate crude for June delivery rose 72 cents to $62.12 a barrel on the New York Mercantile Exchange, its biggest daily gain since April 22.
Brent for July settlement added 49 cents to $70.37 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of $8.15 to WTI for the same month.
The decline in oil stockpiles was the first in the U.S. in three weeks, and came alongside a drop in gasoline and distillate supplies that could generate more demand for crude going forward. Amplifying the impact of fewer Saudi barrels, Venezuelan shipments dropped to zero, amid political strife in that OPEC country. Refinery activity slipped yet again, as petroleum processors face an unusually heavy run of maintenance projects and accidents.
While the trading of actual barrels suggests supplies are tightening, there are signs that clean oil may soon arrive at a key Russian port where exports have slowed. Since the discovery of organic chlorides in Russian exports last month, only one of 13 tankers which loaded at Ust-Luga has discharged its cargo.
On the trade front, Beijing’s top negotiator, Liu He, was set to travel to Washington on Thursday for high-stakes talks, despite Trump’s plan to increase tariffs on $200 million worth of goods. U.S. officials have said their Chinese counterparts reneged in the past week on parts of a draft settlement. That raised the prospect that negotiations between the world’s two biggest economies could collapse entirely.
|Other oil-market news|
©2019 Bloomberg L.P.