Oil heads for best week on pause in US-China trade hostilities

Andrew Cummings
August 30, 2019

US oil futures rose 1.7% on Thursday, lifted by a deep draw on USA crude inventories, especially at the benchmark's delivery hub due to increased demand with the start-up of two new West Texas pipelines. The global benchmark crude traded at a $4.25 premium to WTI.

The prices for oil fell for the 1 time in 3 days following a warning sounded off by Mary Daly, the President of the San Francisco Federal Reserve, regarding the state of the economy for the United States. It is forecast to strengthen and become a highly risky Category 4 hurricane on Sunday, the National Hurricane Center said.

On Wednesday, the 28th of August 2019, both United States and Brent crude posted a gain of roughly 2 per cent following an unprecedented decline in United States crude inventories, which in effect had headed off some concerns over a moderating crude oil demand stemmed of a tormenting trade battle between the world's first- and second-largest economies, Washington and Beijing.

Along with stockpiles declining nationwide, USA government data showed inventories at the storage hub of Cushing, Oklahoma, fell to the lowest level in eight months. USA crude was up $1.38 at $56.31 a barrel by 11 a.m. EDT (1500 GMT).

EPIC Midstream Holdings LLC and Plains All American Pipeline LP both opened new lines from the Permian to Corpus Christi, Texas, in mid-August.

"There's a lot of big numbers here, but it's all on the import number, which is pretty impressive", said Bob Yawger, director of energy futures at Mizuho in NY.

At 427.8 million barrels, US crude oil inventories were at the five year average for this time of year. Oil prices rose around 1.5 percent in the previous session.

The bank cut its 2019 Brent price forecast to $60 per barrel from $65, and cut its WTI outlook for the third and fourth quarters of this year to $55 from $58; it also lowered its 2019 oil demand growth outlook to 800,000 barrels per day (bpd) from 1 million bpd, and its 2020 forecast to 1 million bpd from 1.4 million bpd. "You'll see a continued decline in Cushing inventories".

Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, the world's biggest oil consumers, along with the potential hit to oil demand, are keeping prices in check. European and US equities pared earlier declines as a spokesman for China's Commerce Ministry signaled that the country wouldn't immediately retaliate against the latest USA tariff increase, saying it was more important to discuss removing the additional duties. "It would not take much in terms of negative economic news tied to U.S".

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