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Crude oil prices keep their uptrend on Wednesday

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Crude oil prices keep their uptrend on Wednesday after rising in the last session thanks to renewed hopes for improvement of the US-Chinese trade relations and the US-Iran tensions in the Middle East.

The international Brent oil adds a minimum of 0.03% to a value of 62.16 USD per barrel after yesterday the commodity rose by 2%. The US light crude oil West Texas Intermediate (WTI) increased by 0.18% to 54.21 USD per barrel after rising by 3.8% on Tuesday.

WTI oil

Yesterday, US President Donald Trump wrote on Twitter that he had begun preparations for his meeting with Chinese leader Xi Jinping at the G20 summit in Osaka next week. It will be held after the Sino-American trade negotiations were ended last month when Washington accused Beijing of withdrawing from commitments already made. The communication between the two countries has been limited since then.

Global demand for crude oil was boosted amid the expectations that trade talks show some positive signs, Both oil varieties were split up with earlier increases in the Asian session after data showed that Japan’s exports dropped for the sixth consecutive month in May due to weaker supplies to China.

Meanwhile, tensions in the Middle East remain high after an attack on tankers in the Gulf of Oman and Donald Trump’s words that the United States is ready for military action, blaming Iran for the attack.

This week, the authorities in Iran said they would violate the nuclear deal within 10 days, which makes it possible to lay the foundations for nuclear weapons development. However, according to Teheran, European countries still have time to save the nuclear agreement with Iran, concluded during the term of the former US President Barack Obama.

Market participants also expect a forthcoming meeting between the Organization of Petroleum Exporting Countries (OPEC) and other producers, including Russia, to decide whether to extend the agreement on the contraction of output that expires at the end of this month.

Major oil-producing countries meet in Vienna on July 1 and 2, the OPEC website and a delegate said Wednesday, after the biannual gathering had been postponed several times. The 176th meeting of the OPEC Conference will be on July 1 followed by the sixth meeting of OPEC and non-OPEC ministers, which includes Russia.

US oil inventories

The American Petroleum Institute (API) reported a small draw in crude oil inventory of 812,000 barrels for the week ending June 13, but still coming in over analyst expectations of a much bigger 2.033-million barrel drawdown in inventories.

The API also reportedly showed a stockpile climb of 1.5 million barrels in gasoline, while distillate supplies edged down by 50,000 barrels.

Last week, the API reported a surprise build of 4.852 million barrels. A day later, the EIA estimated that US inventories had built more modestly, by 2.2 million barrels.

The net build is still an uncomfortable 34.02 million barrels for the 25-week reporting period so far this year, using API data.

Inventory data from the Energy Information Administration will be released Wednesday. The EIA data are expected to show crude inventories fell by 2 million barrels last week, according to a survey of analysts conducted by S&P Global Platts. The survey also forecasts an increase of 1 million barrel each for gasoline and stockpiles.

Hedge funds cut long positions on oil futures

Spooked by gloomy outlooks for the global economy and oil demand growth, hedge funds continue to amass shorts and cut longs in oil. The money and other portfolio managers cut their net long position—the difference between bullish and bearish bets—in the six most important petroleum futures contracts by 96 million barrels in the latest reporting week to June 11.

Hedge funds cut longs by 54 million barrels, while they added 42 million barrels of shorts in the petroleum contracts in the week to June 11, accelerating the sell-off in the past seven weeks to 396 million barrels. In the 15 weeks before that, money managers had boosted long positions by 609 million barrels, the data compiled by Kemp shows.

The ratio of long to short positions in Brent Crude and WTI Crude dropped to 3:1 in the week to June 11, down from the 11:1 high at the end of April.

In the latest reporting week, most of the sell-off in oil was concentrated in WTI Crude, where shorts jumped by 46%, leaving the net long position at its the smallest since February this year, as continuously growing US production and builds in US crude inventories added to the bearish sentiment.