Trump And Strong Labour Report Credited For Another Round Of Crude Gains

Deals signed with Saudis, possible deal with Iran soothed geopolitical tensions: File Image/Pixabay

Oil on Tuesday enjoyed another round of solid gains, as U.S. president Donald Trump lost no time following up on his interactions with China by turning his focus on fortifying Washington’s relationship with the Middle East.

Brent settled up $1.57 at $66.63 per barrel, and West Texas Intermediate settled up $1.72 at $63.67.

Trump in Riyadh said Tehran must choose between never having a nuclear weapon or dealing with “massive maximum pressure” from the U.S., and he followed through by adding that he wants to make a deal with Iran and see Tehran prosper.

Trump also signed a $600 billion strategic economic partnership with Saudi Arabia and vowed to drop sanctions on Syria in a move to normalize relations.

Oil was also supported by a U.S. Labor Department report pegging inflation in April at 2.3 percent, the smallest year-over-year gain in four years; this in turn compelled JP Morgan Chase and Barclays to cut forecasts of an impending U.S. recession.

JP Morgan analysts said in a note, “Despite the deteriorating outlook for crude demand, positive signals from the fuel markets cannot be overlooked.”

Lower inflation would presumably encourage the U.S. Federal Reserve to keep interest rates unchanged, which would spur consumer spending.

And while the usual number of analysts fretted about the rising stockpiles and the prospect of weakening demand, gasoline spreads on Tuesday reached their strongest levels in months, in fact an indication of robust demand as Americans increasingly favour road travel over flying (but admittedly, a flood of crude offers in the North Sea trading hub indicated oversupply concerns).

Also on Tuesday and a possible influencer in near-term crude trading, the American Petroleum Institute estimated that crude oil inventories in the U.S. rose by 4.287 million barrels in the week ending May 9, compared to expectations for a 2.4 million barrel draw.

Additionally, Washington on Tuesday rolled out another round of sanctions targeting an Iranian oil smuggling network allegedly responsible for funnelling billions in crude sales to China on behalf of Iran’s Armed Forces General Staff.

In a press statement, the U.S. State Department said, “As long as Iran devotes its illicit revenues to funding attacks on the United States and our allies, supporting terrorism around the world, and pursuing other destabilizing actions, we will continue to use all the tools at our disposal to hold the regime accountable.”