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Oil rises from 5-week low; supply risks trump trade-talk failure
OIL rebounded from a five-week low as Russia's contamination crisis and an industry report signalling a drop in American gasoline inventories took precedence over growing fears that US-China trade talks will fail.
Futures rose as much as 0.9 per cent in New York after dropping 1.4 per cent on Tuesday. Russian tankers continue to hold Urals crude exported from the country's Baltic Sea port of Ust-Luga, a sign that the contamination issues remain unresolved.
US crude stockpiles climbed by 2.81 million barrels last week, but gasoline inventories fell by a similar amount in a bullish sign for demand, the American Petroleum Institute was said to have reported on Tuesday.
Oil's rally had gone into reverse late last month on speculation that Saudi Arabia and other producers will fill the gap created by the loss of Iranian barrels. Signs the global economic outlook is improving had been preventing steeper declines, but that's now been thrown into doubt by the White House's plan to raise tariffs on Chinese imports. A delegation from Beijing is still set to visit Washington this week for talks, providing a glimmer of hope for investors.
Howie Lee, an economist at Oversea-Chinese Banking Corp (OCBC) in Singapore, said: "Russian supply issues are contributing to the overall tightness in market, but it's expected to be a short-term thing.
"I think people are just taking a breather today because the Chinese delegates are moving to Washington for talks. Overall, the situation remains fraught with risks."
West Texas Intermediate (WTI) crude for June delivery rose 46 cents, or 0.8 per cent, to US$61.86 a barrel on the New York Mercantile Exchange at 7:34 am in London. The contract dropped by 85 US cents to US$61.40 on Tuesday, the lowest close since March 29.
Brent for July settlement climbed 34 US cents, or 0.5 per cent, to US$70.22 a barrel on the London-based ICE Futures Europe exchange. It closed at US$69.88 on Tuesday, the lowest since April 4. The global benchmark crude was at a premium of US$8.24 to WTI for the same month.
Only one of 13 tankers that loaded at the Ust-Luga terminal since the discovery of organic chlorides in Russian crude last month has discharged its cargo. Some of these ships that loaded potentially tainted oil have been anchored awaiting discharge for up to 10 days, Bloomberg said. Others are floating at sea, apparently halted partway through their journeys.
The API report on US stockpiles comes before Energy Information Administration (EIA) data due on Wednesday.
The EIA will report a 1.9 million barrel expansion in nation-wide inventories in the week through May 3, according to the median estimate in a Bloomberg survey. BLOOMBERG