By Saket Sundria and Grant Smith
“There is no guarantee of continuous and sustained strength — nevertheless, there is currently a kind of feel-good factor surrounding the oil market,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
Crude has swung between gains and losses this month as investors reacted to trade war developments. Germany is preparing fiscal stimulus measures to head off the chances of a deep recession, while more Federal Reserve rate cuts are expected to shore up American growth. Analysts are forecasting that U.S. crude stockpiles fell for the first time in three weeks, a positive sign for oil markets.
West Texas Intermediate crude for September delivery rose 11 cents to $56.32 a barrel on the New York Mercantile Exchange as of 10:47 a.m. in London. The contract, which expires Tuesday, increased $1.34 on Monday. The more active October contract rose 10 cents to $56.24.
Brent for October settlement rose 12 cents to $59.86 on the ICE Futures Europe Exchange after climbing 1.9% on Monday. The global benchmark crude traded at a premium of $3.62 a barrel to WTI, having touched the lowest since March 2018.
While the White House’s move on Huawei was seen as encouraging for the prospects of a trade deal between the world’s two largest economies, the U.S. added more than 40 affiliates of the Chinese company to a trade blacklist. Huawei said in a statement the reprieve doesn’t change the fact that it has been “treated unjustly.”
“The outcome of the next U.S.-China trade meeting will be the true litmus test for oil markets,” said Stephen Innes, managing partner at VM Markets Pte. in Singapore. “Oil traders don’t want to race too far ahead of the economic realities of the trade war narrative, so a bit of profit-taking is in order.”
The Federal Reserve will hold its annual symposium in Jackson Hole, Wyoming, later in the week, where the speech of Chairman Jerome Powell will be closely watched.
American crude stockpiles fell by 1.4 million barrels in the week through Aug. 16, according to the median estimate in a Bloomberg survey. The official data from the Energy Information Administration is due Wednesday.
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