Oil jumps 3% due to firm yuan, expectations of more OPEC cuts
Oil jumped more than $1 a barrel on Thursday on expectations that falling prices could lead to production cuts, coupled with a steadying of the yuan currency after a week of turmoil spurred by an escalation in U.S.-China trade tensions.
Brent crude was up $1.37 at $57.63 a barrel, after hitting a session high of $58.01. U.S. West Texas Intermediate (WTI) crude futures rose $1.76, or 3% to $52.87 a barrel.
China’s yuan strengthened against the dollar and its exports unexpectedly returned to growth in July on improved global demand despite U.S. trade pressure.
“Brent and WTI were rebounding on the combination of a stronger-than-expected official fix in the yuan, alleviating currency war fears,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
Reports that Saudi Arabia, the world’s biggest oil exporter, had called other producers to discuss the slide in crude prices might also have supported the market, he said.
Both crude contracts fell to their lowest since January on Wednesday after the U.S. Energy Information Administration said U.S. crude stockpiles rose last week after nearly two months of decline as imports hit their highest since January.
Emily Ashford, executive director of energy research at Standard Chartered, said she would not read too much into a “short-term rise” on Thursday as it could be a correction to a sell-off that was “a little too extreme”.
“We believe the oil market is starting to price in the fear of a severe and multi-year breakdown in U.S.-China economic relations,” she said.
Crude oil shipments into China, the world’s largest importer, in July rose 14% from a year earlier as new refineries ramped up purchases. Fuel exports continued to climb as supply outstripped demand in the world’s second-largest oil consumer.
Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said.
Geopolitical tensions over the safety of oil tankers passing through the Persian Gulf remained unresolved as Iran refused to release a British-flagged tanker it seized last month.
The U.S. Maritime Administration said U.S.-flagged commercial vessels should send their transit plans for the Strait of Hormuz and Gulf waters to U.S. and British naval authorities, and that crews should not forcibly resist any Iranian boarding party.