Brent Crude Gets Nudge as Market Weighs Trump Comments
Brent crude rose even as President Donald Trump said the U.S. isn’t ready to make a trade deal with China, casting a shadow on prospects for oil-demand growth.
Futures in London gained as much as 1%, with the UK and U.S. both closed for public holidays. U.S. crude held gains above $58/bbl after American explorers reduced drilling activity to the lowest level in more than a year. The U.S. isn’t ready to reach a trade pact with China, and it isn’t pursuing regime change in Iran, Trump said in Tokyo. Prices edged lower on his comments initially but later rebounded.
U.S. crude was little changed after posting its biggest loss of the year last week, including a 5.7% drop on Thursday. Political tensions in the Middle East persisted but got no worse, allaying fears that oil 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.
“Saying they’re not ready to make a deal with China really doesn’t help sentiment, but we’ve seen such a sell-off over the last week or so, and I think we’re seeing the market consolidate around these levels,” said Warren Patterson, head of commodities strategy at ING Bank NV.
Permian drillers continue to deploy fewer rigs amid U.S.-China trade war
Brent crude for July settlement was 0.7% higher at $69.14/bbl on London’s ICE Europe Futures at 5:55 p.m. in Dubai. The global benchmark crude settled 1.4% higher on Friday. Brent is trading at a $10.65 premium to West Texas Intermediate, the widest spread in almost a year.
WTI for July delivery was down 18 cents at $58.45/bbl on the New York Mercantile Exchange. The contract closed 72 cents higher on Friday, paring its loss for the week to 6.6%.
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. However, 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, said Michael Poulsen, an analyst at A/S Global Risk Management Ltd.
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.