Meanwhile, a rise in U.S. inventories spooks traders: File Image/Pixabay
The quicker than expected recovery of Saudi Arabia crude facilities that were bombed last week, combined with an unexpected rise in U.S. stockpiles, resulted in a second day of price losses for oil on Wednesday.
Shortly after the Energy Information Administration revealed that American inventories rose 2.4 million barrels last week instead of the 249,000 barrel decline predicted by analysts, Brent settled 71 cents lower at $62.39 per barrel, or 1.1 percent, while West Texas Intermediate settled 80 cents, or 1.4 percent, lower at $56.49 per barrel.
Traders also took a dim view of prince Abdulaziz bin Salman, energy minister for the Saudis, stating that output following the September 14 attack on two processing facilities will be fully back online by the end of September; it didn't help that sheikh Mohammed bin Khalifa al-Khalifa, oil minister for Bahrain, said on Wednesday that his country's oil imports from Saudi Arabia have now returned to normal.
Carsten Fritsch, commodity analyst, Commerzbank
It is reasonable to doubt that Saudi Aramco has already made good the outages
However, negative trading activity was tempered by U.S. president Donald Trump saying a deal to end a nearly 15-month trade war with China could happen sooner than people think; this along with Trump stating that he saw a path to peace with Iran mitigated price losses.
Still, the crude market overall remains in the doldrums; Jim Ritterbusch, president of Ritterbusch and Associates, noted that "The complex is seeing significant downside pressure today off further reduction in risk appetite related to lack of progress on the U.S.-China trade front as well as the impeachment inquiry that appears poised to reduce appeal for risky assets."
Analysts are now suggesting that the Saudi claims of production recovery may not be entirely truthful, and Howie Lee, economist at OCBC, said as much on Wednesday by pointing out that prices could still receive a boost should buyers of Saudi crude have to look for supplies in the spot market if Saudi stocks ran out.
He remarked, "The market is very concerned about the demand side of the equation, but I would caution against being complacent about what's happening in the Middle East."
Carsten Fritsch, commodity analyst at Commerzbank, was even more explicit: "It is reasonable to doubt that Saudi Aramco has already made good the outages in the affected facilities almost completely."