Oil Recovers as China and US Hold New Round of Trade Talks

Oil prices rebounded on Thursday as the crude found support on China’s statement about sending a delegation to the US, while sentiment remained cautious amid the trade dispute and concerns over an economic slowdown in emerging markets.  

Brent crude, the global oil benchmark, was up 0.03 percent to $70.78 per barrel from its last close.

US West Texas Intermediate (WTI) futures climbed 0.03 percent to $65.03 per barrel, although its gains were slightly capped by growing US crude output and storage levels.

Both benchmarks fell more than 2 percent on Wednesday after the Energy Information Administration (EIA) reported a 6.8 million barrel growth in US crude inventories in the week to August 10, compared with expectations of a 2.4 million barrel drop.

The build certainly has not helped sentiment, according to a Dutch bank.

Analysts said while the general sell-off in commodities can be connected to rising worries that trade wars and emerging market problems, ranging from the Turkish lira’s weakness to the Chinese slowdown, oil also had to digest some rather bearish-looking US inventory data.     

China and US to Hold New Round of Trade Talks

Providing prices some support on Thursday was the news of China’s plans to hold a new round of trade negotiations with the US in Washington later this August, in hopes of averting a trade war that has put global markets on edge.  

Chinese Ministry of Commerce stated that the US had invited a delegation, led by Vice Minister of Commerce Wang Shouwen, to meet a group led by US Secretary of Treasury for International Affairs David Malpass.

The world’s two largest economies have imposed several rounds of tit-for-tat tariffs on each others’ products, including the implementation of 25 percent tariffs on $34 billion worth of each others’ goods in July, and have threatened additional levies on exports worth hundreds of billions of dollars.  

The US is due to put further tariffs on $16 billion of Chinese products into effect on August 23 and so far it is unclear whether the new discussions will take place before that date.

Oil Markets Remain Bearish on Slowing Demand

Despite a rebound in oil prices, growth in US crude production and storage levels, as well as weakness in emerging market economies particularly in Asia, has left market sentiment bearish on Thursday.

EIA data showed production of US crude have climbed by 100,000 barrels per day (bpd) in the week ending August 10, to 10.9 million bpd, while US oil supply added 6.8 million barrels to 414.19 million barrels.

While inventories rose in the US, Asia’s markets appeared to be losing economic momentum due to trade conflicts with the US and currency weakness.

Commodity analyst stated that oil prices show bearish signals as investors worry about weaker global demand and rising production levels.

Japanese exports to the US slipped 5.2 percent in July, according to official data released on Thursday. The country also saw a decline in crude oil imports, with its imports from Iran at 162,222 bpd between January and June 2018, down 2.7 percent year on year.

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