Oil prices rose on Tuesday on a possible rise in Chinese infrastructure which would boost crude demand in China, shifting attention from the ongoing US – China trade war. Equinor photo.
US oil prices up over 1 per cent Tuesday
Oil prices rose on Tuesday after reports that China will boost its crude demand as Beijing invests in infrastructure development. The announcement shifted the markets’s focus away from ongoing trade tensions between the the US and China and oversupply concerns.
By 2:25 p.m., EDT, benchmark Brent crude was up 44 cents to $73.50/barrel and US West Texas Intermediate 74 cents to $68.63/barrel, down from a session high of $68.84. The Canadian Crude Index slipped 34 cents to $40.77.
For weeks, the market has been concerned that trade tensions between the US and China would cut the Asian country’s demand for crude, according to Phil Flynn, analyst at Price Futures Group.
Flynn told Reuters “infrastructure spending from China in the past had really jacked up oil demand, and I think that’s adding some outside support for prices”.
According to Gene McGillian, vice president of market research at Tradition Energy, buyers are coming back into the market after an 8 per cent fall from multi-year highs. McGillian told Reuters that after drops in oil inventories due to rising demand, the market is expected to remain in balance unless Saudi Arabia or Russia significantly increase their crude production.
Both US WTI and Brent dropped in value this month due to rising supplies from Russia and OPEC and resumption of some lost production due to unrest.
The Trump administration’s threat of a confrontation in the Middle East and trade dispute with major trading partners has also left the market uneasy in recent weeks.
President Trump is pushing countries to not purchase any of Iran’s 3.75 million barrels per day (b/d) of crude. Trump has set a deadline of November for countries to buy oil from other producers.
In response to the expected loss of Iranian crude to the market, Saudi Arabia and other large producers increased their production.
Analysts polled prior to the US Energy Information Administration’s crude inventory data release say they expect US crude stocks to have fallen by 3.2 million barrels last week.
Crude stock data from the American Petroleum Institute will be available on Tuesday afternoon and EIA data will be released Wednesday morning.