By Saket Sundria and Grant Smith
Oil held near $57 a barrel as a report showed a hefty drop in U.S. crude inventories and as the resumption of face-to-face trade discussions between Washington and Beijing provided a glimmer of hope for demand.Futures in New York were up 0.5% after rallying 2.7% over the previous three days. The American Petroleum Institute reported a 10.96 million barrel decline in stockpiles last week, according to people familiar with the data. That’s more than twice the drop forecast in a Bloomberg survey before official figures due Wednesday. U.S. Trade Representative Robert Lighthizer will travel to China Monday for the first high-level, face-to-face talks since May.Nonetheless, another sign that the global market might be weakening emerged as prompt front-month contracts of Brent — the international crude benchmark — traded at a discount to the second month for the first time since March. The price structure, known as contango, typically indicates that short-term supplies are exceeding demand.West Texas Intermediate for September delivery rose 27 cents, or 0.5%, to $57.04 a barrel on the New York Mercantile Exchange as of 7:41 a.m. local time after climbing as much as 50 cents earlier. It closed 1% higher on Tuesday.Brent for September settlement advanced 17 cents to $64 a barrel on the ICE Futures Europe Exchange after settling 0.9% higher on Tuesday. The global benchmark crude is trading at a $6.97 a barrel premium to WTI. However, September Brent traded at a discount of 9 cents against October, compared with a premium of 66 cents last week, pointing to weakness in physical markets.
U.S. inventories will have fallen for six straight weeks if the API figures are confirmed by Energy Information Administration data. That’s tightening the supply backdrop just as simmering tension in the Persian Gulf threatens to disrupt crude flows from the region. Still, demand remains shaky, with the International Monetary Fund cutting its global growth projections Tuesday and warning that policy “missteps” on trade and Brexit could derail a rebound.
“The inventory reduction was almost three times as pronounced as had been expected,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.
U.S. inventories dropped 4.26 million barrels last week, according to the median estimate in a Bloomberg survey. If the API numbers are confirmed by the EIA, that would be the largest decline since mid-June. However, the API said gasoline stockpiles rose by 4.44 million barrels, which would be the largest build since January.
U.S. Trade Representative Lighthizer and a small team will be in Shanghai through Wednesday, according to people familiar with the plans who asked not to be identified. The meeting will involve a broad discussion of the issues outstanding and isn’t expected to yield major breakthroughs, a senior Trump administration official said.
|Other oil-market news
- Iran will make “utmost efforts” to allow the safe passage of tankers in the Persian Gulf region, its deputy foreign minister said, while urging European nations to act more forcefully against U.S. sanctions on its oil exports.
- Big Oil is feeling the heat heading into the second-quarter earnings season after a lull in natural gas prices.
- Russia’s oil output showed signs of recovering after the nation’s crude-pipeline operator removed constraints on its biggest producer.
- Alaskan oil shipments to South Korea are picking up, in another sign of the growing U.S. influence on the global market.
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