Oil holds near US$54 on China data

Bloomberg

Sun, Feb 03, 2019 - Page 14

Oil on Friday held near US$54 a barrel in New York as weak Chinese manufacturing data and persistent uncertainty over US-China trade talks stoked concerns that slowing growth could hurt demand.

West Texas Intermediate futures were steady after rising more than 18 percent last month.

A Chinese factory purchasing managers’ index for last month fell to its lowest level in almost three years, showing the damage the trade war is doing to Asia’s largest economy.

The White House said that progress had been made in talks, but did not detail any new commitments from either side.

Oil has been stuck at less than US$55 per barrel even as OPEC and its allies cut production in an effort to bolster prices that sank almost 40 percent last quarter.

Gains over the past month have been capped by continued uncertainty over whether the US and China can tamp down their trade conflict.

“We are seeing quite a bit of disappointment creeping into the market with the failure to move higher,” Saxo Bank A/S head of commodities strategy Ole Hansen said.

“For now, the market seems to be adopting a wait-and-see approach on the demand side, which has yet to be negatively impacted by the economic slowdown witnessed in recent months,” he said.

West Texas Intermediate for delivery next month slipped US$0.22 to US$53.57 per barrel on the New York Mercantile Exchange at 8:35am. It dropped US$0.44 to US$53.79 on Thursday.

Brent for April settlement rose US$0.13 to US$60.97 per barrel on the London-based ICE Futures Europe exchange, trading at a US$6.95 premium to West Texas Intermediate for the same month.

Next month’s contract on Thursday expired after climbing US$0.24 to US$61.89.

The Chinese manufacturing purchasing managers’ index last month fell more than expected to 48.3, the latest evidence of a slump in factory sentiment across Asia.

While the US Federal Reserve this week provided a reprieve to global markets by signaling a pause in interest rate hikes, it failed to assuage investor worries about the disruption to business orders and investment plans as the trade war drags on.

The US and China plan further discussions before a March 1 deadline, when new tariffs kick in.

“Much work remains to be done,” the White House said in a statement, in which it reiterated its threat to raise levies on Chinese goods.

In Venezuela, the US in updated guidance on its sanctions moved to block state oil company Petroleos de Venezuela SA and its customers from using the US financial system.

Any transactions with the firm, or any entity in which it has a controlling stake, involving US citizens or passing through the US’ financial system must be wound down by April 28, the US Department of the Treasury said.

The sanctions could directly halt 500,000 barrels per day of Venezuelan oil exports to the US, Citigroup Inc analyst Ed Morse wrote in a report.

There is a 50 percent chance that the losses could near 1 million barrels per day, he said.

In other energy futures trading, wholesale gasoline rose 4.3 percent to US$1.44 per gallon and heating oil gained 1.9 percent to US$1.91 per gallon, while natural gas dropped 2.8 percent to US$2.73 per 1,000 cubic feet.

Gold fell 0.2 percent to US$1,316.90 per ounce and silver lost 0.9 percent to US$15.93 per ounce, while copper dropped 0.4 percent to US$2.77 per pound.

Additional reporting by AP