Oil futures gained one per cent overnight, boosted by a surprise drawdown in US crude stockpiles but an escalating US-Chinese trade fight limited oil’s gains as investors worried about the global outlook for energy demand.
Brent crude futures rose 49 US cents, or 0.7 per cent, to settle at $US70.37 a barrel, while US West Texas Intermediate (WTI) crude ended 72 US cents, or 1.2 per cent, higher at $US62.12.
US crude inventories fell 4 million barrels last week, the Energy Information Administration said, compared with analysts’ forecast of a 1.2 million-barrel build.
“The crude data removes a bearish consideration in our view that had accommodated the heavy WTI liquidation phase of the past couple of weeks,” said Jim Ritterbusch, president of Ritterbusch and Associates.
So far this year, prices have gained more than 30 per cent as the global supply outlook has tightened due to US sanctions on crude exporters Iran and Venezuela, as well as supply cuts by OPEC, Russia and their allies.
The United States will not grant any more waivers to any countries that would allow them to buy Iranian oil without facing US sanctions, a senior US diplomat said.
The US on Wednesday also threatened to impose more sanctions on Iran “very soon” and warned European countries against doing business with Tehran.
Oil prices have been pressured this week by escalating tensions between the United States and China.
The United States will raise tariffs to 25 per cent from 10 per cent on $US200 billion worth of Chinese imports effective Friday, according to a notice posted to the Federal Register.
US President Donald Trump had threatened the duties after China backtracked on a trade deal.
However, White House spokeswoman Sarah Sanders said on Wednesday the United States had received an indication from China that it wanted to make a trade deal.
Chinese Vice Premier Liu He will travel to Washington DC for two days of trade talks this week, Chinese officials said on Tuesday.
“The market is fearful that the other shoe is going to drop on the global economy if we get into a trade war; it will hurt oil demand,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
“So people have been bearish because of that.”
China’s crude imports in April hit a record for the month, at 10.6 million barrels per day (bpd), customs data showed on Wednesday.
The country is the world’s biggest oil importer.
Saudi Arabia is expected to keep its crude exports below 7 million bpd in June, while output would stay under its production quota under a global deal to cut supply, a Gulf source familiar with Saudi oil plans said.
Azerbaijan’s oil minister said it had received assurances from Saudi Arabia, de-facto OPEC leader, that Riyadh would not take any unilateral decisions on the global oil deal until the group’s June meeting.
Lack of clarity in oil fundamentals will keep Brent crude price volatility high in the next couple months, testing Goldman Sach’s expected boundary range of $US70-$US75 per barrel, the bank said in a note.