Oil gains on easing trade war concerns, sanctions on Iran

Gladys Abbott
August 23, 2018

U.S. West Texas Intermediate (WTI) crude futures were up 24 cents, or 0.4 percent, at $66.67 per barrel. Nationwide inventories in the United States probably fell 2 million barrels last week, according to a Bloomberg survey of analysts before the Energy Information Administration's data due Wednesday.

Total U.S. crude stockpiles, however, were forecast to have drawn down about 1.5 million barrels last week, according to analysts polled ahead of industry data due at 4:30 p.m. EDT on Tuesday and government data on Wednesday.

Friday's pull back from session highs came on mounting worries US crude inventories would post another consecutive gain, said Bob Yawger, director of futures at Mizuho Americas, Reuters reported.

Brent crude futures, which act as a benchmark for global oil prices, were at $71.60 per barrel at 0531 GMT, down 23 cents, or 0.3 percent, from their last close.

Marketmen said the trading sentiment in futures trade dampened after crude oil prices eased in global market amid concerns over slowing economic growth weighed on markets.

China has indicated that it will ignore the US sanctions.

In Washington, a Chinese delegation led by Vice Commerce Minister Wang Shouwen will meet their U.S. counterparts for trade talks after earlier negotiations broke down.

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How prices develop will also depend on demand.

"The upcoming U.S. -China trade talks are unlikely to offer any significant breakthroughs as more formal discussions and, hence, decisions will likely await expected talks in November between Trump and Xi", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Iran, OPEC's third-largest oil producer, relies on sales of crude to China, Japan, South Korea, India and the European Union to generate the lion's share of budget revenues and keep its economy afloat.

In the United States, U.S. energy companies last week kept the oil rig count unchanged at 869, according to the Baker Hughes energy services firm. Rising supplies have also weighed on prices, with US output near a record-high and after the Organization of Petroleum Exporting Countries and allies boosted production in July.

But most European companies have conceded that they would be forced to walk away from Tehran for fear of sanctions and losing access to operations that require USA dollars. "The EIA [US Energy Information Administration] report was one of the most bearish reports in recent memory". The contract dropped 0.2 percent on Friday.

Matthew Smith, the director of commodity research at ClipperData in Houston, told Xinhua that "the market continues to be confused by the conundrum of immediate strong supply, offset by the expectation of lower supplies in the coming months".

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