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Oil Gains as Saudi Outlays Shrink Amid Simmering Demand Fears

Crude rallied late last week after Saudi Arabia signaled it would seek to halt the price slump.

Oil Gains as Saudi Outlays Shrink Amid Simmering Demand Fears
An oil pumping jack, also known as a ‘nodding donkey,’ operates in an oil field near Samara, Russia. (Photographer: Andrey Rudakov/Bloomberg)

(Bloomberg) -- Oil advanced as the world’s biggest oil exporter opened its books to investors amid a deepening U.S.-China trade war that has imperiled global energy demand.

Futures settled 0.8% higher in New York on Monday. Saudi Arabia’s state-owned oil explorer curbed capital spending by 12% in the past year, a potential harbinger of tightening supplies. Meanwhile, U.S. President Donald Trump said trade talks with China set for next month may fall through, and American orders for gasoline from European refiners waned.

“There seems to be a tug of war between supply and demand right now,” said Ashley Petersen, lead oil market analyst at Stratas Advisors. “We’re getting some indicators that supply is being actively managed but there are also concerns about demand that are so entrenched at this point.”

Oil Gains as Saudi Outlays Shrink Amid Simmering Demand Fears

Despite the increase, crude remains down this month on fears the U.S.-China trade spat may expand into a currency war. The International Energy Agency on Friday trimmed its forecasts for oil-demand growth this year and next, and warned that it may lower the estimates further as the trade conflict drags on.

West Texas Intermediate crude for September delivery gained 43 cents to settle at $54.93 a barrel on the New York Mercantile Exchange.

Brent for October settlement added 4 cents to $58.57 on the ICE Futures Europe Exchange. The contract slumped 5.4% last week. The global benchmark crude traded at a $3.72 premium to WTI for the same month.

Trump said earlier this month that new tariffs on Chinese imports will take effect Sept. 1, shattering a truce reached with President Xi Jinping weeks earlier. The comments unleashed tit-for-tat measures on trade and currency policy that risk accelerating a wider geopolitical fight between the two countries.

Meanwhile, last week, unnamed Saudi Arabian officials said the kingdom plans to keep crude exports below 7 million barrels a day in September as it allocates less oil than customers demand. Aramco will also provide customers across all regions with 700,000 barrels a day less than they requested, the officials said.

Oil-market news
  • Gasoline futures fell 88 cents to settle at $1.6652 a gallon.
  • Aramco will buy a stake in the refining and chemicals business of India’s Reliance Industries Ltd., moving to diversify from Saudi Arabia as its first half-year earnings report showed a drop in net income.
  • Motiva’s Port Arthur refinery on the Texas Gulf Coast will start a multiunit turnaround Sept. 4 that is scheduled to last until around Oct. 21, according to a person familiar with operations.
  • Money managers increased by 5.4% their net bets that WTI crude would rally even as futures tumbled in the week ended Aug. 6, data released Friday show.
  • American oil explorers, harried by investors to scale back spending, idled drilling rigs for a sixth straight week.

--With assistance from James Thornhill, Grant Smith and Heesu Lee.

To contact the reporter on this story: Kiran Dhillon in New York at kdhillon18@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Carlos Caminada

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