Oil holds gains on record gasoline exports, trade-war optimism

Oil news
Barrels of refined oil and lubricant additives sit on shelves in the storage yard at Rock Oil Ltd.'s factory in Warrington

Oil prices bobbed higher Wednesday as American gasoline exports surged and trade tensions showed signs of easing between the U.S. and China.

Futures in New York climbed 0.9 percent at 12:55 p.m. A U.S. Energy Information Administration report showed the nation’s exports of the motor fuel were the highest since weekly reporting began in 2010 and refinery activity remained near a record. Total crude inventories were higher than expectations but still fell for a second week in a row.

“The second straight draw is obviously constructive from a demand standpoint, especially relative to all the builds we were seeing in the previous weeks,” said Nick Holmes, a director at Kansas-based Tortoise, which oversees a $16 billion energy portfolio.

Crude rode in the slipstream of a global equities rally fueled by hopeful trade signs. In Canada, the chief financial officer of Chinese telecom giant Huawei Technologies Co. was granted bail; U.S. President Donald Trump, meanwhile, said he’d consider intervening in the case if it helps get a trade deal between the world’s two biggest economies. The S&P Energy Index gained as much as 2.3 percent, on track for its best day in more than a week.

Oil prices remain in a bear market after plummeting from a four-year high in early October, even after OPEC and its allies pledged output cuts last week. Traders remain concerned that American production will continue to flood world markets and skeptical that all the countries in the OPEC+ coalition will scale back supplies as promised.

West Texas Intermediate for January delivery initially lost much of its daily gain after the EIA said domestic oil inventories had fallen 1.21 million barrels, well below the 10 million barrel decline forecast in an industry report Tuesday. Reporting delays on crude imports and exports may explain some of the discrepancies, said Holmes.

But prices regained some of the ground as attention turned to the healthy numbers for refined products demand. WTI gained 47 cents to $52.12 on the New York Mercantile Exchange, after earlier climbing as high as $52.88. Total volume traded Wednesday was 20 percent above the 100-day average.

Brent for February settlement rose 64 cents to $60.84 a barrel on London’s ICE Futures Europe exchange, after moving as high as $61.43. The global benchmark crude traded at an $8.55-a-barrel premium to WTI for the same month.

American refiners have been ramping up production since last month, with crude-processing rates rising to record levels following the seasonal maintenance period. As oil-product exports from the U.S. surge, refineries operated at 95.1 percent of capacity in the week ended Dec. 7, just below the high-water mark set two weeks ago.

Other oil-market news: Gasoline futures in New York increased 0.5 percent to $1.4472 a gallon. OPEC data showed that it may need to cut even deeper than it agreed in the second half of next year to prevent a surplus. The  U.S. government left its forecast for domestic crude production unchanged for 2019 even with prices averaging almost $11 a barrel lower than its previous estimate. America’s shale boom may help spare  oil tanker owners at risk from OPEC’s reduction.

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