Oil stabilises, supported by upbeat US inventory data

New York — Oil prices steadied on Thursday, supported by a bullish US inventory report from the previous session even as an escalating trade dispute between the US and China weighed on demand expectations.

Brent crude oil was up two US cents a barrel at $74.80 by 3.13pm GMT. US light crude was 2c lower at $67.84 a barrel.

“The market is trying to balance the worries about decreased global demand growth and how much extra oil the Saudis and Russians are going to put on,” said Gene McGillian, director of market research at Tradition Energy.

At the same time, he said, the market was getting support from strong demand growth showed in Wednesday’s weekly inventory report from the Energy Information Administration (EIA).

“There’s a better fundamental picture than a year ago,” he said.

The trade dispute between the US and China deepened on Thursday with the imposition of 25% tariffs on $16bn worth of each other’s goods.

The world’s two largest economies have now imposed tariffs on a combined $100bn of products since early July, with more in the pipeline, adding to risks to global economic growth.

Washington is holding hearings this week on a proposed list of another $200bn worth of Chinese imports to face duties, to which China is almost certain to respond.

“These [overall] measures are expected to shave up to 0.3-0.5 percentage points from China’s real GDP growth in 2019,” said ratings agency Moody’s Investor Service.

“For the US … trade restrictions will trim off about one-quarter of a percentage point from real GDP growth to 2.3% in 2019.” Oil demand is closely linked to economic activity and the trade dispute has already led analysts to trim their forecasts for future energy consumption.

But while the outlook for oil demand growth may be moderating, some markets are tight.

Source: businesslive.co.za