Morning Market Overview
New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange advanced on the session while mixed on the week, with the West Texas Intermediate contract registering the biggest loss on the week on building stocks while the U.S. dollar maintained an upside push, trading at a 96.49 5-1/2 week high today.
Oil futures came under pressure Thursday into overnight trade on concern over demand as economic growth in the European Union is slowing more quickly than expected in February, with the primary catalyst for the slowdown the U.S.-China trade dispute. Optimism for a U.S.-China trade deal in February was also quashed after U.S. President Donald Trump said he would need meet with China’s President Xi Jinping before the end of a truce to their trade dispute on March 1, a condition he said was needed before a final agreement would be reached. Completing a trade deal in February was already seen as a longshot by some analysts, although the reason the two leaders won’t meet by March 1 is a busy calendar for Trump, who will meet North Korea’s leader, Kim Jong Un, on Feb. 27-28 in Vietnam to discuss denuclearization.
The important summit might provide an acceptable reason for Trump to delay a 15% increase in U.S. tariffs on $200 billion in Chinese imports to 25% on March 2. Cabinet level officials from the United States will meet with their Chinese counterpart in Beijing next week to continue negotiations. U.S. supply data and declining production by the Organization of the Petroleum Exporting Countries also directed trading, with climbing commercial crude supply in the United States pressuring WTI futures while OPEC cuts in January boosted Brent.
The Energy Information Administration on Wednesday reported a 0.5 day increase in days of forward commercial crude supply to 26.6 days as of Feb. 1, a 10-week high while matching the five-year average. The building inventory comes as refiners begin idling units for seasonal turnarounds, lending upside support for oil products.