Oil Jumps as Possible Delay for Mexico Tariffs Dispels Gloom

(Bloomberg) -- Oil staged a late-session revival to post the biggest daily advance in six weeks, a day after worries about an oversupply pushed prices into a bear market.

After hovering near a five-month low for most of Thursday, futures jumped in the final 30 minutes of the session to close 1.8% higher in New York. The move came as Mexican officials said they were making progress in talks with American counterparts, while the U.S. considers delaying threatened tariffs.

“Markets in general have been a little bit more optimistic,” said Daniel Ghali, a TD Securities commodities strategist. He said the rally was likely accelerated as short-sellers who bet on lower prices were forced to close out their trades.

Oil was still in bear territory, having fallen more than 20% since late April as the U.S.-China trade dispute intensified and President Donald Trump sought to push Mexico on immigration.

“It really is a question of whether the U.S. and China will tank their economies to spite one another,” Cailin Birch, an economist at the Economist Intelligence Unit in London, said in an interview. With Trump and Chinese President Xi Jinping expected to meet at the end of the month, “I wouldn’t expect prices to show much more strength over the course of June.”

A government report this week disclosing the biggest jump in American petroleum stockpiles since 1990 added to concerns about a looming glut, although some traders were raising questions about discrepancies on Thursday.

West Texas Intermediate futures for July ended the session 91 cents higher at $52.59 a barrel on the New York Mercantile Exchange, the biggest increase since April 22. Brent for August settlement rose 1.7% to $61.67 on London’s ICE Futures Europe Exchange.

Also see: 24-Million Barrel Question: Where Is All That Missing U.S. Oil?

Oil’s rout since late April has raised stakes for the OPEC+ coalition of producers as their output cuts agreement is set to expire in a matter of weeks.

While the Saudi Arabia want to extend output cuts beyond June, the Russians have at best been non-committal. It will be the first face-to-face meeting between the two nations’ energy ministers since May, when the gap between their outlooks emerged.

Speaking at an economic conference on Thursday, Russian President Vladimir Putin emphasized differences between the two producers. While reiterating a desire to cooperate, Putin said his country is happy with a lower oil price than the Saudis.

--With assistance from James Thornhill, Paul Allen and Saket Sundria.

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net;Grant Smith in London at gsmith52@bloomberg.net

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

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