SEOUL – Oil prices trod water on Thursday after losses in the previous session, as traders were cautious amid concerns over a potential delay in sealing a long-awaited interim US-China trade deal and a huge increase of US crude stockpiles.
Brent crude futures were down 3 cents, at $61.71 a barrel after settling down $1.22 per barrel, or almost 2 percent on Wednesday.
West Texas Intermediate crude futures were at $56.29 a barrel, down 2 cents, from their last close. They settled 88 cents lower, or 1.54 percent, in the previous session.
US crude oil stockpiles rose 7.9 million barrels last week as refiners cut output and exports fell, beating analysts’ expectations for an increase of 1.5 million barrels, the Energy Information Administration (EIA) said on Wednesday.
Gasoline and distillate inventories dropped 2.8 million barrels and by 622,000 barrels respectively.
“The inventory builds and drops in exports is likely related to the COSCO sanctions,” said Stephen Innes, market strategist at AxiTraders, referring to the Chinese tanker firm the United States sanctioned, among others, in late September for alleged involvement in moving crude oil from Iran.
US crude exports fell nearly 1 million barrels last week to 2.4 million barrels per day.
“The sanctions are coming back to haunt oil bulls as a trifecta of negativity if you include the probable delay in signing the Phase one trade deal” between the world’s top two economies and biggest oil consumers, Innes said.
A meeting between US President Donald Trump and Chinese President Xi Jinping to sign an interim deal could be delayed until December as talks continue over terms and venue, a senior official of the Trump administration told Reuters on Wednesday.
It was still possible the “phase one” agreement aimed at ending a damaging trade war would not be reached, but a deal was more likely than not, the official said on condition of anonymity.
Expectations for a thaw in trade tensions have supported oil prices over the past several sessions
Jeffrey Halley, senior market analyst at OANDA, said the discouraging trade deal news and a massive rise in US crude inventories pulled down both Brent and WTI overnight.
“Both contracts are unchanged in early trading. We expect this status quo to continue throughout the session,” Halley added.
US crude oil stockpiles rose sharply last week as refineries cut output and exports dropped, while refined products extended a multi-week drawdown, the Energy Information Administration said.
The drop-off in refining utilization and a slump in exports, which some analysts believe is tied to reduced tanker availability due to US sanctions on Chinese shipping firm COSCO, surprised many.
“I guess we stopped using oil last week. It’s amazing. This is definitely a shocking number – even if you’re bearish you’re shocked,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Distillate stockpiles, which include diesel and heating oil, fell by 622,000 barrels, versus expectations for a 949,000-barrel drop, the EIA data showed. Overall distillate inventories, which have declined for seven weeks in a row, fell to 119.1 million barrels, their lowest since June 2018.
Gasoline stocks also extended their decline, falling for the sixth straight week, with a 2.8 million-barrel draw, compared with analysts’ expectations for a 1.8 million-barrel drop. – Reuters