Crude oil futures were higher during mid-morning trade in Asia Friday as markets remained focused on the ongoing trade talks between the US and China, while the latest survey on OPEC production levels also kept prices supported.
At 11:03 am Singapore time (0303 GMT), July ICE Brent crude futures were up 40 cents/b (0.57%) from Thursday’s settle at $70.79/b, while the NYMEX June light sweet crude contract gained 47 cents/b (0.76%) at $62.17/b. A Chinese delegation, led by Vice-Premier Liu He, met US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday.
“It’s possible to do it, they’re all here,” US President Donald Trump said Thursday, according to CNBC, indicating the possibility of a trade deal with China. The United States Trade Representative Wednesday took steps to formalize President Donald Trump’s threat to boost tariffs on $200 billion worth of Chinese goods to 25%, from 10%, and the Chinese Ministry of Commerce warned of retaliatory steps should the US follow through. “Escalating trade tensions between the world’s two largest economies have negated risk sentiments as markets fret over the impact of potential trade tariffs,” Phillip Futures’ investment analyst Benjamin Lu said.
Meanwhile, supply side issues continue to grab market attention, analysts said. According to an S&P Global Platts survey, OPEC’s collective crude oil production in April held relatively steady from March, rising just 30,000 b/d to 30.26 million b/d. Saudi Arabia, the organization’s largest producer by far, held its April output at 9.82 million b/d, the lowest in over four years and well below its quota under an OPEC/non-OPEC accord, according to the survey, as it continues to demonstrate considerable restraint on hopes of bolstering oil prices.
However, with the US this month tightening its sanctions on crude exports from Iran by allowing waivers to eight countries to expire, all eyes will be on Saudi Arabia and how it manages its production going forward. Iran pumped 2.57 million b/d in April, a 120,000 b/d drop from March and the lowest since December 1988, the Platts survey found, as many buyers began to shy away in anticipation of the US decision on the sanctions waivers. Many analysts expect an even heftier fall in Iranian crude production going forward as the US cracks down on sanctions enforcement.
“Saudi Arabia is not willing to increase the oil supply at short notice,” analysts from Commerzbank said in a note. “It only plans to provide the market with additional supply when actual bottlenecks occur. This points to higher oil prices in the short term,” they added.
Saudi Arabia is set to host a meeting of the nine-country OPEC/non-OPEC market monitoring committee that it co-chairs with Russia on May 19 in Jeddah, where comments from oil ministers are sure to be monitored closely. As of 0230 GMT, the US Dollar Index was up 0.12% at 97.28. Platts.com
Pix: OPEC headquarters, Vienna Austria
