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Oil price rises despite douse in US, China trade row

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OIL prices rose by over three per cent in trend analysts pin to latest moves by United States to postpone its plans to impose tariff on some products into America from China, thereby freeing crude market from fear of global trade war that loomed in recent months.

Brent crude went up by $1.75 in a 3.1 percent increase from the previous settlement at $60.32 per barrel. U.S. West Texas Intermediate (WTI) futures were up by $1.38 or 2.5 percent to peak at $56.31 while U.S. dollar index jumped and bond yields also turned higher after the U.S. Trade Representative said some products were being removed from the China tariff list.

Oil prices had see-sawed earlier in the day amid demand worries and rising global supplies and expectations for deeper production cuts from leading producers.

Reports in a forecast by American Energy Information Administration (AEIA) state that U.S. oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September, to rally at a record 8.77 million bpd.

“The big test now is whether the shale producers can keep growing production at these lower price levels,” said Callum Macpherson, head of commodities at Investec. This could be the start of a re-adjustment process from the artificially high prices OPEC is implicitly trying to maintain down to something more in line with the marginal shale production costs,” the reports reads.

It is expected that Saudi Arabia plan to keep its crude exports below 7 million bpd in August and September, despite proposals to float its national oil company Saudi Aramco in what could be the world’s largest initial public offering (IPO), will further help to drain global oil inventories and boost prices.

Meanwhile, there are indications that OPEC and its allies will continue to enforce their agreement of 1.2 million bpd cut from daily production which started on January 1.

 

 

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