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US Crude Rebounds on Bullish Supply Report

August 28, 2019 at 17:34 by Andrew Moran

Crude oil futures are rallying midweek after the US government reported a decline in domestic inventories. Oil prices have shed 3.5% this month, driven by fears that the global economy is cooling down, which would weigh on crude demand. With recession concerns growing, investors may be cautious of going long on oil.

October West Texas Intermediate (WTI) crude oil futures rose $0.86, or 1.57%, to $55.79 per barrel at 17:11 GMT on Wednesday on the New York Mercantile Exchange. Crude prices are still trading in positive territory on the year, advancing 22%. But the escalating US-China trade war and worries about the global economy slowing down have pared some of its gains this year.

Brent, the international benchmark for oil prices, is also advancing in the middle of the trading week. November Brent prices climbed $0.90, or 1.52%, to $59.93 a barrel on London’s ICE Futures exchange. Year-to-date, Brent prices are up 11%.

According to the US Energy Information Administration (EIA), domestic crude inventories declined 10 million barrels for the week ending August 23, which represents the largest decline in five weeks. The market had forecast a decrease of 4.7 million barrels. Gasoline stockpiles slipped by 2.1 million barrels, while distillate supplies fell by 2.1 million barrels.

The US Baker Hughes total oil rig count came in at 754, down from 770.

After peaking in April, oil prices have shed about a fifth, a downward trend dominated by the prolonged US-China trade dispute.

Experts agree that tariffs, which have cost consumers billions each month, and uncertainty are affecting global economic growth. When it comes to sectors, no industry has been more harmed by the trade war than agriculture; American farmers have been decimated in 2019. Soybean farmers have contended with soaring storage costs, rotting inventories, and tumbling sales all year long.

Although investors do anticipate that Washington and Beijing will return to the negotiating table soon, there is a dispute as to who initiated contact to restart trade talks.

In other energy markets, October natural gas futures soared $0.06, or 2.78%, to $2.25 per million British thermal units (btu). September gasoline futures tacked on $0.02, or 1.4%, to $1.56 a gallon. September heating oil futures jumped $0.03, or 1.84%, to $1.85 per gallon.

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