Oil Jump As US Stock Build Diverts Trader Attention Away From Trump

But everything from tariffs to ramped up production keep sentiment bearish: File Image/Pixabay 

Crude traders themselves on Wednesday contributed to what has largely been Trump-led market volatility, by reacting strongly to data indicating tighter than expected U.S. oil and fuel inventories, and a 2 percent rise in two key benchmarks being the outcome.

Brent settled up $1.39, or 2 percent, at $70.95 per barrel, while West Texas Intermediate settled up $1.43, or 2.2 percent, to $67.68 per barrel.

The Energy Information Administration on Wednesday reported that crude stockpiles rose by 1.4 million barrels in the latest week, but U.S. gasoline inventories fell by a massive 5.7 million barrels, versus expectations for a 1.9 million barrel draw.

Distillate inventories also dropped more than expected.

Still, the analytical outlook weighed strongly in the bears' favour, with reaction to U.S. president Donald Trump's tariffs against countries perceived as both friendly and hostile driving negative sentiment above all other factors.

Hassan Fawaz, chairman and founder of brokerage GivTrade, said, "Fears of a U.S. recession, weakness in U.S. stock markets and concerns over tariffs affecting key oil players such as China, introduced additional market uncertainty - and these factors could continue to fuel a bearish sentiment, putting a lid on oil prices."

Bloomberg, in noting that the Organization of the Petroleum Exporting Countries' (OPEC) is releasing additional barrels into the market and that production in the U.S. and South America is growing, stated, "While they don't see the prospect of a crash, top traders including Vitol and Gunvor said prices could grind lower as supply starts to outstrip demand."

For his part, Russell Hardy, chief executive officer at Vitol, estimated prices could now trade in a new range of about $60-$80 per barrel – which troubled Saad Rahim, chief economist at Trafigura: "$60 feels too low for much of the industry to work."

As for geopolitical influences making the oil picture even murkier, Ukraine accepted a U.S. proposal for a 30-day truce with Russia, which kindled hopes in some quarters that a permanent ceasefire between the two countries could be possible after all.

In other oil news on Wednesday, ship-tracking data and trading sources showed that crude imports by India from Russia are rebounding in the wake of Washington's sanction's on the former Soviet Union's oil trade.

Traders have booked more non-sanctioned tankers to deliver crude to India, while the price of Russia's flagship Urals grade has dropped to below the $60 per barrel price cap set last year by the G7.