Concern over rising global crude supplies is spoiling oil’s part in a commodity rebound driven by signs of easing tensions between the world’s two largest economies.
Futures in New York were little changed and those in London were up only 0.4 percent while most industrial metals and agricultural commodities rose over 1 percent. While a broad rally in raw materials was sparked by China’s announcement Thursday about planned talks in Washington this month over a trade stand-off, oil’s gains were limited by speculation that supplies will be more than ample even if demand isn’t affected.
After earlier negotiations between the U.S. and China broke down two months ago, tensions between the nations stoked fears that global economic growth would be hurt and sap energy consumption. More recently, prices have been dragged down as economic turmoil in Turkey threatens to seep into other emerging markets. Additionally, a surprise gain in U.S. crude inventories last week as well as rising production by OPEC have also hit oil.
“An increase in crude inventories, despite record refinery crude processing, has had a big impact” on the market, Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., said by phone from Tokyo. “Instead of escalating the trade war, China says it will put talks on the table. That may stem any damage to economic growth, and limit its impact on oil demand.”
Brent for October settlement rose 28 cents to $71.04 a barrel on the London-based ICE Futures Europe exchange at 2:53 p.m. Singapore time. Prices dropped $1.70 to $70.76 on Wednesday, capping a decline of over 5 percent since the middle of last week. The global benchmark crude traded at a $6.53 premium to U.S. West Texas Intermediate for the same month.
WTI for September delivery traded up 8 cents at $65.09 a barrel on the New York Mercantile Exchange. The contract declined $2.03 to $65.01 on Wednesday. Total volume traded was in line with the 100-day average.
Futures for December delivery dropped 2.3 percent to 498.3 yuan a barrel on the Shanghai International Energy Exchange.
China will dispatch Vice Commerce Minister Wang Shouwen to the U.S. in late August. The two nations had appeared to have reached a deal in May, but American President Donald Trump backed away from the agreement a few days later. Since those talks ended, the administrations in Washington and Beijing have been locked in a trade standoff as they slapped tariffs on billions of dollars of each other’s goods.
While optimism grows that U.S.-China tensions could de-escalate as they return to the negotiation table, the unexpected gain in American crude inventories continued to weigh on prices. Nationwide stockpiles rose by 6.81 million barrels last week, the most since 2017, while those at the Cushing storage hub in Oklahoma expanded for the first time since May. Both were forecast to fall in Bloomberg surveys.
Other oil-market news:
The U.S. and Turkey remained locked in a stalemate that has jolted global markets, as the White House said new tariffs on Turkish goods would remain.