EMEA News
Thursday Oil Markets: Crude Firms as Qatar Maintains it Still Too Early to Exit Oil Deal
It's all but official: the anxiety of a trade war between China and the U.S., which spooked traders after the conflict began making headlines last week, has diluted to the point where crude prices have resumed their normal pattern of following the equity market: and with gains in that market occurring on Thursday, U.S. crude jumped upward accordingly.
West Texas Intermediate rose 17 cents to settle at $63.53 per barrel, while Brent climbed 31 cents to $68.33 - in sharp contrast to both benchmarks hitting two-week lows on Wednesday when China proposed a broad range of tariffs on U.S. exports.
Earlier news that American stockpiles unexpectedly fell by 4.6 million barrels in the most recent week, compared with expectations for an increase of 246,000 barrels, was also said to have supported crude on Thursday.
Commerzbank summarized the market by stating in a note, "Oil prices are profiting from the general brightening of sentiment on the markets as signs emerge that the trade dispute is easing between the U.S. and China"; however, the U.S. dollar rising to a more than one-month high against a basket of major currencies was considered a headwind for oil.
Positive rhetoric from the Organization of the Petroleum Exporting Countries (OPEC) has played a role in buoying prices of late, specifically talk of the likelihood the cartel will forge a long lasting relationship with Russia and other non-members, to ensure that once global supply and demand is rebalanced via its production cuts, it will stay balanced.
Therefore, it's possible crude prices may see a modest rise in coming days thanks to Mohammed al-Sada, energy minister for Qatar, telling Reuters that OPEC and its allies should maintain the oil supply curbs to guarantee healthy price levels and industry investment.
He said, "There is a clear recovery in oil prices, but it has not been met with an increase in investments ... Investment has been very low [and] my concern is that medium- to long-term demand is met comfortably.
"Investors are still cautious and over-conservative."
Stating that money needs to go toward replacing production from mature fields and launching new projects, al-Sada went on to observe that "I would see the need to keep the [OPEC cooperation] momentum....we need to restore investments."
As for U.S. shale's enormous influence over global activity, he said charitably, "Even with shale, the market is heading for balance."
Another element that could influence prices Friday or even early next week is Saudi Arabia unexpectedly raising the price of its key Arab Light crude in Asia, move interpreted by traders as bullish.
Refiners had anticipated a 60 cent per barrel decrease, but state-run Saudi Aramco raised its selling price for the grade by 10 cents per barrel, making the differential $1.20 per barrel above a Middle East benchmark for May loadings.
Bloomberg noted that such departures from expectations "are fairly unusual because they suggest Saudi Arabia may have had a different interpretation of key market data points like refining margins."
Despite oil's performance on Thursday, many experts still think there are rough times ahead: earlier this week Saxo Bank worried that with the long/short ratio of futures being so skewed, it is questionable who is going to be motivated to buy if a lot of selling pressure occurs.
