U.S. oil held gains above $58 a barrel after American explorers reduced drilling activity to the lowest level in more than a year, even as President Donald Trump said Washington isn’t ready to make a trade deal with China.
Futures in New York edged lower after closing 1.2% higher on Friday, amid the intensifying trade dispute between the world’s two largest economies. Trump said he isn’t pursuing regime change in Iran, in spite of U.S. sanctions on the OPEC member’s oil exports. Working U.S. rigs fell to its lowest level since March 2018, according to Baker Hughes data released Friday.
Oil posted its biggest loss of the year last week, including a 5.7% drop on Thursday. Even before the plunge, money managers had reduced bullish bets on West Texas Intermediate to the lowest in two months. Political tensions in the Middle East persisted but got no worse, allaying fears that crude shipments might be disrupted. Data released Monday showing a drop in Chinese industrial profits for April provided more evidence of the trade war’s impact.
“We have seen now that China is using a little less oil — a lot of the teapot refineries are not consuming as much as projected,” said Michael Poulsen, an analyst at A/S Global Risk Management Ltd. The number of rigs in operation in the U.S. “is not as significant as it used to be” because more shale oil wells are drilling into the same amount of crude, he said.
West Texas Intermediate crude for July delivery fell 32 cents, or 0.6%, to $58.31 a barrel on the New York Mercantile Exchange at 1:49 p.m. in Dubai. The contract closed 72 cents higher on Friday, paring its loss for the week to 6.6%.
Brent for July settlement was almost unchanged at $68.72 a barrel on London’s ICE Europe Futures after settling 1.4% higher on Friday. The global benchmark crude is trading at a $10.39 premium to WTI.
While Beijing is committed to reaching an agreement with the U.S., it’s ready to respond with more countermeasures, Chinese envoy Cui Tiankai said in an interview with Bloomberg TV on Friday. Futures in New York closed higher on Friday after Baker Hughes released data showing the number of working U.S. rigs fell for the fifth time in six weeks.
The impact of the drop in U.S. rigs is likely to be temporary, and oil prices will probably stay under pressure this week, said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Ltd. in Singapore.
Other oil-market news A global shortage of heavy crude will create hurdles for America’s key refining belts just as they ramp up gasoline production for summer driving season. Russian Deputy Prime Minister Dmitry Kozak is confident that a deal with Poland on dirty oil will be reached by June 10. Saudi Arabia was the top crude oil supplier to China in April, according to China Customs General Administration data. Chinese imports from the kingdom surged 43% from a year earlier ago to 6.3 million tons in the month. Crude futures for July delivery declined 0.8% to 468.9 yuan a barrel on the Shanghai International Energy Exchange.