More Flat Trading for Crude as Promising Economic Indicators are Eclipsed by Short-Term Concerns

Impending good news about China and Brexit are all but ignored on Thursday: File Image/Pixabay

Another flat day of crude trading occurred on Thursday due to the usual conflicting influences of stockpile draws being capped by worries over weak economic figures from the U.S.

According to the U.S. Energy Information Administration, gasoline stocks fell by 2.6 million barrels in the week to October 11, while distillate stockpiles including diesel and heating oil fell by 3.8 million barrels.

By contrast however, crude stocks rose by 9.3 million barrels, far surpassing estimates for a build of 2.8 million barrels; and further dampening trading enthusiasm was news on Thursday that U.S. retail sales fell for the first time in seven months, while housing starts and industrial output dropped as well.

As a result, Brent rose 49 cents to settle at $59.91 per barrel, and West Texas Intermediate gained 57 cents to settle at $53.93 per barrel.

Level-headed analysts tried to focus on the good aspects of Thursday's news: Phil Flynn, senior energy analyst at Price Futures Group, said of the EIA's disclosures, "This is generally a bullish report, [and] part of the problem for the build is that refineries are not running; refinery runs fell down, which is a concern."

But Gene McGillian, vice president of market research at Tradition Energy, echoed the sentiments of many colleagues by stating his worry over economics: "If we see more indications of slowing demand, I think the market is going to continue to sink lower."

Concerns aside, there is considerable reason for hope that the economy may not be in as much trouble as the experts fear: despite hiccups, many signs point to an eventually resolution of the China/U.S. trade war, with China's commerce ministry on Thursday saying that it hoped to reach a phased agreement with Washington as early as possible and make progress on cancelling tariffs on each others' goods.

Also on Thursday came word from British prime minister Boris Johnson that Britain and the European Union had agreed a "great" new Brexit deal and urged lawmakers to approve it at the weekend; European Commission president Jean-Claude Juncker also said Britain and the EU had agreed a deal.

And for those who worry about reduced demand for gasoline specifically and crude in general, the International Energy Agency revealed on Thursday that the number of SUVs operating around the world grew from 35 million in 2010 to over 200 million last year, a 60 percent increase.

The agency also noted that 100 percent of the increase in demand for oil for passenger cars was driven by the popularity of larger vehicles, and that if the appetite of SUVs continue they would "add nearly 2 million barrels a day in global oil demand by 2040."