Crude oil remains under pressure on Wednesday as risks to the global economy continue to weigh on the market as a result of the US-China trade war.
The futures on US crude oil WTI fell by 0.28% to 53.48 USD per barrel, while the Brent variety declined by 0.29% to 58.77 USD per barrel.
Brent prices fell more than 9% last week after US President Donald Trump said he would impose a 10% duty on Chinese imports with an annual turnover of 300 billion USD from September 1. This has also led to serious sales in the stock markets.
Traders are attributing short-covering and profit-taking to the early strength on Tuesday, but gains are being capped by the escalating trade dispute between the United States and China.
In the meantime, Saudi Arabian Energy Minister Khalid Al-Falih and US Energy Secretary Rick Perry said during a meeting on Tuesday in Washington that the two countries are concerned about free movement of ships in the Arabian Gulf. The ministers confirmed that the United States and Saudi Arabia, as the world’s two leading oil suppliers, will continue to work together to securely supply the global oil market in order to mitigate the effects of potential supply disruptions, especially given aggressive attempts by Iran to destabilize markets. Anti-Iran sanctions, including a ban on oil purchases, were restored by Washington in November 2018. It happened shortly after President Donald Trump decided to unilaterally withdraw the United States from the Iran nuclear deal.
The tensions in the Middle East have intensified since the attacks on tankers and drones, raising concerns about the passage through the Strait of Hormuz, a key route for the world oil trade.
At the same time, some support for oil prices comes from the larger-than-expected fall in US crude oil reserves.
Venezuela, the almost-forgotten name in US sanctions returned to the fore of the oil market on Tuesday as the Trump administration ratcheted up action against the South American country in a move that only briefly lifted crude prices. The US President Donald Trump signed an executive order late Monday to declare a total economic embargo against Venezuela, freezing all of the government’s assets and prohibiting transactions with the country unless specifically exempted. Trump wrote to Congress that the decision is designed to put further strain on Venezuela “in light of the continued usurpation of power by the illegitimate Nicolás Maduro regime”.
US oil inventorties
The American Petroleum Institute (API) reported a crude oil inventory draw of 3.4 million barrels for the week ending August 2, compared to analyst expectations of a 2.848-million barrel draw.
The inventory draw this week compares to last week’s large draw of 6.024 million barrels, bringing the net inventory moves for the year into net draw territory, according to API data. A day later, the EIA confirmed an inventory drawdown of 8.5 million barrels.
After today’s inventory move, the net draw for the year is 8.23 million barrels for the 32-week reporting period so far, using API data.
The API this week reported a 1.1-barrel draw in gasoline inventories for the week ending August 2. Analysts predicted a draw in gasoline inventories of 722,000 barrels for the week.
The distillate inventories rose by 1.2 million barrels for the week, while inventories at Cushing fell by 1.6-million barrels.
The administration showed that production for the week ending July 25 rebounded to 12.2 million barrels per day, just 200,000 barrels per day off the all-time high of 2.4 million barrels per day.
The U.S. Energy Information Administration report on crude oil inventories is due to be released at its regularly scheduled time on Wednesday at 10:30 a.m. EST.