Oil headed for its biggest weekly increase since mid-July after a sizable drop in American crude inventories and an apparent pause in U.S.-China trade hostilities eased demand fears.
Futures in New York fell 0.9 per cent on Friday but are up 3.7 per cent for the week. China said Thursday that it wouldn’t immediately retaliate against the latest White House tariff increase, spurring optimism that Beijing wants to reach a deal. Traders were watching for any disruptions from Hurricane Dorian, which was forecast to become a major storm later on Friday as it heads toward Florida.
“There’s discussions about China and the U.S., but right now we are starting to be in the period where the tropical weather is an increasing factor,” says Olivier Jakob, managing director at Petromatrix GmbH.
Despite this week’s gains, oil remains under pressure as the outlook for the global economy continues to be weak and the U.S. produces at record-high levels. The Organization of Petroleum Exporting Countries and its allies said this week they expect to deplete the global oil surplus with their cuts, and falling inventories in America are indicating some level of success.
West Texas Intermediate for October delivery declined 53 cents, or 0.9 per cent, to US$56.18/bbl on the New York Mercantile Exchange as of 11:25 a.m. London time. The contract is heading for the biggest weekly gain since July 12.
Brent for October settlement lost 5 cents, or 0.1 per cent, to US$61.03/bbl on the ICE Futures Europe Exchange, and is up 2.9 per cent this week. The global benchmark crude traded at a $4.50 premium to WTI on Friday.
President Donald Trump said in a Fox News radio interview Thursday that the U.S. and China were scheduled to hold trade talks. He didn’t give further details, and there was no subsequent confirmation that the meeting took place. Trump also said that tariffs are working and that he wasn’t going to give up.
Traders are also keeping an eye on Hurricane Dorian that’s now expected to become a Category 4 storm and make landfall on Florida’s east coast, the first major hurricane to hit the area in 15 years. If the storm only strikes Florida it will likely be bearish for crude prices as it will stymie demand, according to UBS Group AG analyst Giovanni Staunovo. However, if it moves into the Gulf of Mexico, it could cut U.S. output and lift prices, he added.
© 2019 Bloomberg L.P.