Oil Gains Fuelled By Sentiment As Bearish Fundamentals Accumulate

Meanwhile, oil trading giants go on a spending spree: File Image/Pixabay

Oil prices on Thursday held steady, fuelled partly by the aftermath of reports that U.S. stockpiles experienced a larger than expected draw last week – however, as in previous sessions, gains were capped by bearish news from around the world.

As of 1543 GMT, Brent was up 13 cents at $87.47 per barrel, and West Texas Intermediate was up 3 cents at $83.91 per barrel.

Traders considered the implications of news that industrial orders in Germany fell unexpectedly in May, which in turn exacerbated concerns that a full economic recovery in that country was still on the horizon.

Orders were down by 1.6 percent on the previous month on a seasonally and calendar-adjusted basis, according to the federal statistics office, and flying in the face of expectations for a 0.5 percent rise.

Also, illustrating the headwinds facing the global economy, Saudi Arabia's Saudi Aramco on Thursday cut the price for the flagship Arab light crude it will sell to Asia in August to $1.80 per barrel above the Oman/Dubai average.

However, the lingering hope within the analytical community is that weaker economic circumstances could speed along interest rate cuts by institutions such as the U.S. Federal Reserve and thus boost demand, even though the Fed has repeatedly stated it won’t act until prolonged signs of weakness become evident.

In other oil news on Thursday, Kurt Chapman, a board member of trader Levmet and former head of crude at Mercuria Energy Group, told media that oil trading giants with their huge amassed profits are on a buying spree for refineries that major international oil and gas producers are selling as part of their portfolio realignments.

Vitol Group bid for the parent company of refiner Citgo Petroleum in June; Rhône Energieshas entered into exclusive negotiations to buy the Fos-sur-Mer refinery and the Toulouse and Villette de Vienne terminals from ExxonMobil’s local unit Esso; and Shell reached an agreement to sell its refining and chemicals assets in Singapore to CAPGC Pte. Ltd., a joint venture company between Chandra Asri Capital Pte. Ltd. and Glencore Asian Holdings Pte. Ltd.

Chapman said, “The traders see an opportunity to end up with a plant that can run a slew of different crude oils.”