Oil prices recorded marginal gains on Wednesday due to a steep decline in US crude stocks, positive signs on Sino-US trade talks and continuing tensions over Iran.
However, worries about weak demand kept the gains to a minimum.
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Brent crude futures LCOc1 were up by 21 cents, or 0.3%, at $64.04 a barrel, after rising by nearly 1% on 23 July 2019. US West Texas Intermediate crude CLc1 increased by 28 cents, or 0.5%, at $57.05 a barrel after rising by about 1% in the previous session, Reuters reported.
Trade group American Petroleum Institute said that crude stocks in the US declined more than expected in the week to 19 July, falling by 11 million barrels to 449 million. Analysts had expected a decline of four million barrels.
Crude stocks at the delivery hub in Cushing, Oklahoma, decreased by 448,000 barrels, even though gasoline stocks increased by 4.4 million barrels, compared with analysts’ expectations of a 730,000-barrel decline. Analysts said that signs of a revival of Sino-US trade talks also helped boost oil prices.
On 23 July 2019, White House economic adviser Larry Kudlow said that it was a good sign that top US officials would be travelling to China to discuss reviving stalled trade talks.
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By GlobalDataOANDA senior market analyst Edward Moya was quoted by Reuters as saying: “The possible nearing of a trade deal provided a strong bid for risky assets, lifting oil to its third consecutive gain.”
Meanwhile, signs of mounting tensions in the Middle East offset a weak global growth outlook from the International Monetary Fund.
The US military said that a Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, even though the drone was not seen going into the water. Meanwhile, Britain garnered support from France, Italy and Denmark for a plan for a European-led naval mission to ensure safe shipping in the Strait of Hormuz.
Phillip Futures commodities analyst Benjamin Lu said: “Shaky macroeconomic fundamentals and downward revisions by IEA on global oil demand has capped bullish gains. Markets fear looser market fundamentals in the longer term.”
