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Oil mixed on forecast of falling US fuel stockpiles
[HOUSTON] Oil prices were mixed on Tuesday, paring earlier steep losses as investors focused on signs that US-China trade tensions could ease next month and expectations that US refined product stockpiles declined last week.
Brent crude settled at US$61.59 a barrel, up 2 cents, after falling as low as US$60.66. US West Texas Intermediate crude ended 27 cents lower at US$55.54 a barrel, after earlier hitting a session low of US$54.61.
US refined product inventories were seen declining last week as refinery runs remained relatively low. Petrol stocks likely fell 2.2 million barrels, which would their fifth weekly drawdown, while distillates which include diesel and heating oil, were seen falling for a sixth week in a row, forecast to have dropped by 2.4 million barrels, according to a Reuters poll.
"The market is getting increasingly concerned about refined product inventories, and that's supporting crude oil," said John Kilduff, a partner at Again Capital LLC in New York. "US refiners are operating at super-low capacity. They've had a rough year; there was no real rush to come back into service."
US refinery runs slowed down in September for seasonal maintenance, and were still low at around 85 pre cent of total capacity in the week ended Oct 18, according to the US Energy Information Administration.
Strength in refined products prices, with US petrol futures nearly 1 per cent higher, was pulling crude higher despite forecasts that U.S. crude stocks rose 500,000 barrels last week, analysts said.
Low refinery runs "may be slightly bearish for crude in the short run, but should be wildly bullish for the products. If they don't get going soon, we'll have a shortage of supply," said Phil Flynn, an analyst at Price Futures Group in Chicago.
The first of the weekly supply reports is due at 2030 GMT from the American Petroleum Institute (API), followed by EIA data on Wednesday.
Earlier in the sessions, prices fell on the forecast of the US crude build while Russia's deputy energy minister said it was too early to talk of deeper output cuts by Opec and its allies, adding to the pressure on the market.
The United States and China were continuing to work on an interim trade agreement, but it may not be completed in time for US and Chinese leaders to sign it in Chile next month, a US administration official said.
The clarification of previous White House statements, that US President Donald Trump and Chinese President Xi Jinping were expected to sign "phase one" of the trade deal, stymied oil market optimism that had reversed earlier losses and lifted US equities.
But signs of tension between the United States and China after a nearly 16-month trade war are still fluid and have had an outsized impact on crude prices. Market participants believe the trade war has spooked investors and slowed global economic growth, crimping oil demand.
"After equities went green, crude oil found a bid and has rallied from the lows," said Robert Yawger, director of energy futures at Mizuho.
Oil prices "have been supported by the earnings season on Wall Street and the expectation that the U.S. and China will sign a preliminary, phase-one trade deal," said Andy Lipow, president of Lipow Oil Associates in Houston.