Crude oil prices fluctuate on Friday, splitting hopes that the US and China could soon resolve their trade disputes and recent data raising concerns about the slowdown in the Chinese economy.
The futures on US crude oil WTI depreciated by 0.07% to 53.25 USD per barrel. The Brent variety, however, rose by 0.39% to 61.89 USD per barrel.
The crude oil futures are backed by good performance on capital markets – Asian markets ended Friday trading session at four-month highs amid hopes that the US and China will reach a trade agreement.
However, the crude oil prices are under pressure from the latest Chinese economic data, which shows that factories’ operations have shrunk to their lowest level in the last three years in January on the background of declining orders. This raises concerns that the slowdown in the second largest economy in the world is deepening. With the Chinese industry, a key consumer of fuels such as diesel, such a slowdown is also likely to hit fuel demand.
The traders, in general, commented that oil markets are also backed by a reduction in supply by the Organization of Petroleum Exporting Countries (OPEC). According to a study, the production in OPEC in January was 30.98 million barrels per day, which is 890,000 barrels per day less than in December.
Saudi Arabia appears to be deliberately targeting that data. By reducing shipments to the US specifically, Riyadh can help create the appearance of a tightening oil market. Saudi shipments to the US dropped by 528,000 barrels per day last week to just 442,000 barrels per day, the lowest weekly total in more than two years. In fact, there is suddenly a remarkable confluence of events pushing oil in a bullish direction. First and foremost is the OPEC+ production cuts of 1.2 million barrels per day that are phasing in. But beyond that, the US shale is starting to slow down, and while the output is still expected to grow this year, the increase could be the smallest in years.
Meanwhile, in Venezuela, the US sanctions detain the tankers in ports, which caused serious disruption of deliveries. The expectations are that in February will have a sharp fall in deliveries. The US sanctions could directly halt about 500,000 barrels per day from Venezuela’s exports to the US.
A significant part of Vene\uelan crude oil, which is considered heavy before being delivered to US refineries, has to be diluted and supply cuts may slow down fuel production in the United States.
Some relief, especially for refineries in the northern US, may come from Canadian heavy crude oil, despite infrastructure constraints between the two countries, due to bad weather at the moment. The government of Canadian province Alberta has announced it has increased the oil production limit for February and March to 3.63 million barrels per day, which means a cut of about 75,000 barrels per day from average deliveries of 325,000 barrels per day in December 2018.
US crude oil stockpiles rose less than expected
The US crude oil stockpiles rose less than expected last week due to a drop in imports, while gasoline and distillate inventories fell as refiners slowed down production.
Crude inventories rose 919,000 barrels in the week to January 25, compared with analysts’ expectations for an increase of 3.2 million barrels. The crude stocks at the Cushing, Oklahoma, delivery hub for US crude futures fell by 145,000 barrels, EIA said.
According to the data, the net US crude imports fell last week by 1 million barrels per day. A precipitous drop in imports has helped stave off another big build to crude stocks.
Refinery crude runs fell by 586,000 barrels per day. Refinery utilization rates fell by 2.8 percentage points to 90.1% of total capacity, the slowest rate of production since early November.