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Oil Heads for Biggest Weekly Gain in Seven on Trade War Optimism

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These translations are done via Google Translate

By Tsuyoshi Inajima and Alex Longley

(Bloomberg) Oil headed for its biggest weekly increase since mid-July after a sizable drop in American crude inventories and an apparent pause in U.S.-China trade hostilities eased demand fears.

Futures in New York fell 0.7% on Friday but are up 4% for the week. China said Thursday that it wouldn’t immediately retaliate against the latest White House tariff increase, spurring optimism that Beijing wants to reach a deal. Traders were watching for any disruptions from Hurricane Dorian, which was forecast to become a major storm later on Friday as it heads toward Florida.

WTI is poised for the biggest weekly gain since mid-July

“There’s discussions about China and the U.S., but right now we are starting to be in the period where the tropical weather is an increasing factor,” said Olivier Jakob, managing director at Petromatrix GmbH.

Despite this week’s gains, oil remains under pressure as the outlook for the global economy continues to be weak and the U.S. pumps out crude at record-high levels. The Organization of Petroleum Exporting Countries and its allies said this week they expect to deplete the global oil surplus with their cuts, and falling inventories in America are indicating some level of success.

West Texas Intermediate for October delivery declined 38 cents to $56.33 a barrel on the New York Mercantile Exchange as of 8:56 a.m. local time. The contract is heading for the biggest weekly gain since July 12.

Sky Eye Measurement
Sky Eye Measurement

Brent for October settlement, which expires Friday, lost 8 cents, or 0.1%, to $61 a barrel on the ICE Futures Europe Exchange, and is up 2.8% this week. The global benchmark crude traded at a $4.50 premium to WTI on Friday.

President Donald Trump said in a Fox News radio interview Thursday that the U.S. and China were scheduled to hold trade talks. He didn’t give further details, and there was no subsequent confirmation that the meeting took place. Trump also said that tariffs are working and that he wasn’t going to give up.

Traders are also keeping an eye on Hurricane Dorian that’s now expected to become a Category 4 storm and make landfall on Florida’s east coast, the first major hurricane to hit the area in 15 years. If the storm only strikes Florida it will likely be bearish for crude prices as it will stymie demand, according to UBS Group AG analyst Giovanni Staunovo. However, if it moves into the Gulf of Mexico, it could cut U.S. output and lift prices, he added.

Other oil-market news:
  • Equinor ASA sent an October loading program to traders for its giant Johan Sverdrup oil field, suggesting a potential early start even as the company maintained its November schedule.
  • China’s oil majors wrapped up a first half that rewarded exploration and production and punished refining.
  • The supertanker Adrian Darya 1, which the U.S. is seeking to seize for carrying Iranian oil, started again signaling Turkey as a destination.

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