Oil prices hold near two-week highs on trade war reprieve, weaker dollar
BEIJING: Oil prices held near two-week highs in early trading on Wednesday, supported by an agreement between the US and China to temporarily lower their reciprocal tariffs and a falling US dollar.
Brent crude futures inched down 10 cents, or 0.15 per cent, by 0008 GMT to US$66.53 a barrel. US West Texas Intermediate (WTI) crude slipped 7 cents, or 0.11 per cent, to US$63.60. Both benchmarks climbed more than 2.5 per cent in the previous session.
The dollar index, which measures the greenback against a basket of currencies, fell 0.67 per cent on Tuesday after data showed US inflation was lower than expected. A weaker dollar makes oil less expensive for holders of other currencies, increasing demand.
The two largest economies on Monday agreed to pause their trade war for at least 90 days, with the US cutting tariffs to 30 per cent from 145 per cent and China slashing duties on US imports to 10 per cent from 125 per cent.
Prices had climbed more than $1.60 a barrel on Tuesday following the agreement, settling up nearly 3 per cent.
Rystad energy analysts said in a note that the agreement had "eroded some demand side pessimism," though cautioning that there could be lingering impact from the tariffs despite the rollbacks.
The market was supported by reported declines in US gasoline and distillate inventories, a sign of resilient fuel demand.
Gasoline inventories fell by 1.4 million barrels and distillate stocks fell by 3.7 million barrels, market sources said on condition of anonymity, citing American Petroleum Institute figures on Tuesday. However, crude stocks rose by 4.3 million barrels.
Analysts polled by Reuters expected gasoline stocks to fall by 600,000 barrels, distillate inventories to rise by about 100,000 barrels and crude stocks to fall by 1.1 million barrels.
Official weekly inventory data from the US Energy Information Administration is due on Wednesday at 10:30 a.m. EDT (1430 GMT).
The market is watching US President Donald Trump's trip to the Gulf. He kicked off the visit Tuesday with an appearance at an investment forum in Riyadh, where he announced that the US would lift longstanding sanctions on Syria and secured a US$600 billion pledge from Saudi to invest in the US
Rystad Energy's global head of commodity markets Mukesh Sahdev said that preventing oil price spikes over the summer travel season will be a key part of the president's agenda on the trip, adding that the US could take advantage of lower prices to buy more Middle East crude for its Strategic Petroleum Reserve.
"The big unknown for the market is how US actions related to Iran, Russia and Venezuela will result in supply disruptions or additions," Sahdev said.
The US on Tuesday imposed fresh sanctions on some 20 companies it said were helping Iran's Armed Forces General Staff and its front company, Sepehr Energy, send Iranian oil to China.
The sanctions come following a fourth round of US-Iran talks in Oman aimed at addressing disputes over Iran's nuclear programme.
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