Oil Steadies as U.S.-China Trade Progress Allays Demand Concerns

Oil steadied near $56 a barrel as hints of trade detente between the U.S. and China and the prospect of monetary stimulus buoyed financial markets.

Futures were little changed in New York after closing up 2.4% on Monday. The White House will extend exemptions protecting U.S. customers from a ban on doing business with Huawei Technologies Co. for another 90 days, Commerce Secretary Wilbur Ross said Monday. The move comes after President Donald Trump delayed new tariffs on some Chinese goods until mid-December.

Intra-day volatility in WTI prices has risen this month

Crude has swung between gains and losses this month as investors reacted to trade war developments. Germany is preparing fiscal stimulus measures to head off the chances of a deep recession, while more Federal Reserve rate cuts are expected to shore up American growth. Analysts are forecasting that U.S. crude stockpiles fell for the first time in three weeks, a positive sign for oil markets.

“The outcome of the next U.S.-China trade meeting will be the true litmus test for oil markets,” said Stephen Innes, managing partner at VM Markets Pte. in Singapore. “Oil traders don’t want to race too far ahead of the economic realities of the trade war narrative, so a bit of profit-taking is in order.”

West Texas Intermediate crude for September delivery slipped 1 cent to $56.20 a barrel on the New York Mercantile Exchange as of 8:21 a.m. in London. The contract, which expires Tuesday, increased $1.34 on Monday. The more active October contract fell 3 cents to $56.11.

Brent for October settlement fell 14 cents to $59.60 on the ICE Futures Europe Exchange after climbing 1.9% on Monday. The global benchmark crude traded at a premium of $3.48 a barrel to WTI, the lowest since March 2018.

While the White House’s move on Huawei was seen as encouraging for the prospects of a trade deal between the world’s two largest economies, the U.S. added more than 40 affiliates of the Chinese company to a trade blacklist. Huawei said in a statement the reprieve doesn’t change the fact that it has been “treated unjustly.”

Boston Fed President Eric Rosengren and Kansas City Fed President Esther George pushed back against further U.S. rate cuts, the first time Fed Chair Jerome Powell has faced a double dissent since he took the central bank’s helm in February 2018. Powell’s speech at the annual central banker retreat in Jackson Hole, Wyoming on Friday will be particularly closely watched.

American crude stockpiles fell by 1.4 million barrels in the week through Aug. 16, according to the median estimate in a Bloomberg survey. The official data from the Energy Information Administration is due Wednesday.


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