Oil Prices Steady as Hope Builds For Brexit

But China and the global economy still worry traders: File Image/PixaBay

A major U.S. crude inventory build and guarded optimism over Brexit were responsible on Wednesday for another middling round of crude trading: Brent rose 11 cents to $58.85, up about 0.2 percent from the previous day’s close, while West Texas Intermediate gained 10 cents or 0.2 percent to $52.91 per barrel.

Traders were influenced by the American Petroleum Institute (API) estimating a major crude oil inventory build of 10.45 million barrels for the week ending October 10, compared to expectations of a much smaller 2.87 million barrel build.

Also, the API reported a draw of 934,000 barrels of gasoline for week ending October 10, while the prediction was for a larger draw of 1.38 million barrels.

But API routinely confounds analytical expectations, so perhaps more salient to trading behaviour was a comment made Tuesday by Jim Ritterbusch, president of Ritterbusch and Associates, who, in reacting to Tuesday's modest crude losses, said, “The market continues to focus on a weakening global economic growth path that appeared little disturbed by last week’s apparent lack of significant progress at the U.S.-China trade talks.”

Traders are therefore paying attention to Britain and the European Union reportedly making headway in eleventh-hour talks to reach a Brexit deal; analysts believe any deal that avoids a “hard” or no deal Brexit should boost economic growth; the prospect that Brexit may work out more favourably than initially thought mitigated the potential losses coming from the API report on Wednesday,

Also providing support was Mohammad Barkindo, secretary-general for the Organization of the Petroleum Exporting Countries (OPEC), who said his cartel “will do whatever [is] in its power” to sustain oil market stability beyond 2020.

Edward Moya, a senior market analyst at OANDA, summarized market sentiment by stating, “Oil is starting to see some bullish positions added on the easing of two big tail risks for global demand, the U.S.-China trade war and Brexit."