Oil slumps 4% on U.S. inventory build, equity rally caps losses

Ann Santiago
June 9, 2019

Signals of slowing global economic activity have increased in recent months, fuelled by trade tensions between the United States and China, the world's top two energy consumers.

Brent crude futures were up 50 cents, or 0.8 per cent, at $62.17 a barrel, having risen earlier to $62.41.

The crude oil prices advanced during Tuesday's trading sessions on the exchanges of London and New York, Kazinform correspondent reports.

In an escalation of the trade tensions, Washington on May 10 increased additional tariffs on 200 billion US dollars' worth of Chinese imports from 10 percent to 25 percent, and has threatened to raise tariffs on more Chinese imports. Weakness is likely to prevail unless the US and China announce that trade talks are back on.

Oil prices turned sharply higher just before today's settlement after trading had been flat throughout the day, following reports that the Trump administration may delay tariffs on Mexican imports.

Benchmark Brent crude was at $60.78, increased 15 cents or 0.3 percent in their previous settlement.

Oil prices are up 16% so far this year thanks in part to the OPEC+ deal.

Saudi Energy Minister Khalid al-Falih told a conference in Russian Federation that the Organization of the Petroleum Exporting Countries (OPEC) and its allies should extend oil production cuts.

Both U.S. crude and Brent crude slumped more than 1 U.S. dollar on Wednesday, amid broad jittery over supply gluts from a surprising buildup in U.S. crude stockpiles last week.

Oil is teetering on the edge of a bear market after falling nearly 20% from a peak in late April as an aggressive US trade policy stokes fears that the global economy is headed for a sharp slowdown.

U.S. crude, gasoline and distillate stocks rose last week, the Energy Information Administration said on Wednesday. The EIA also said that total stockpiles are now at 483.3 million barrels, 5 percent above the seasonal average. Crude supply in the US has been growing at a fast pace since 2016.

"It's the flawless storm, in a way, of increased supply coupled with perceptions of slowing demand growth", Steeves said. "To me, that means drawing down inventories from their now elevated levels", Energy Minister Khalid al-Falih was quoted as saying by the Saudi-owned Arab News newspaper. "I don't think there will be a trade war", the minister said.

Comments from Saudi Arabia, OPEC's de facto leader, indicating that the Organization of the Petroleum Exporting Countries and its allies would continue working towards oil market stability in the second half of the year, helped limit Monday's loses.

However, demand sentiment remains weak amid fresh signs of a stalling global economy and an intensifying trade war between the United States and China.

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