Oil prices extend gains, climb further from 5-month lows

Oil prices extend gains, climb further from 5-month lows

"While tight fundamentals supported oil prices through mid-May, escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment", Goldman Sachs said in a recent research note. U.S. crude production also set a record, while imports climbed.

(Graphic: U.S. crude inventories, weekly changes since 2017 png link:

Oil prices hovered near five-month lows in the preceding session, however, sentiment continued lower as markets are under pressure amid surging USA supply and a stalling economy.

The rising dispute in the trade war between the US and China is reflected in crude prices too.

A day earlier, the American Petroleum Institute (API) estimated inventories had gone up by 3.545 million barrels last week, with gasoline inventories also swelling. Analysts' had expected stocks to drop by 849,000 barrels, according to a Reuters poll.

On Wednesday, Brent and WTI sank to their lowest levels since mid-January at $59.45 and $50.60 respectively, after U.S. crude production hit a new record-high and stockpiles climbed to their highest since July 2017. WTI was last trading up $1.50, or 2.9%, at $53.18/Bbl after the settlement.

Brent futures sank as low as $59.45, also its lowest since mid-January.

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USA crude oil inventories also surged by 6.8 million barrels over the same week, to 483.26 million barrels, their highest levels since July 2017. But they have fallen from a peak above $75 in April to below $62 a barrel on concerns about demand due to a U.S.

"Obviously it's more than enough to satisfy demand by a lot and just makes for a really bearish report across the board".

"Prices collapsed as the trade war extended beyond the United States and China", investment strategists at US Bank Wealth Management told clients earlier this week. President Donald Trump's threat last week to slap tariffs on Mexican goods, exacerbating fears that global economic growth will slow and cut demand fuel.

Brent for August settlement gained $1.62 to $63.29 a barrel on London's ICE Futures Europe exchange but was still down 1.9% this week.

"Really $50 is legitimate support zone [for WTI] because we had a hard time getting up and through that on the rally through December", Kilduff said.

Oil has fallen nearly 20% from a peak in late April, taking it to the brink of a bear market, as trade relations between Washington and Beijing soured and the White House announced tariffs on Mexican goods.

TD Securities analysts points out that for the oil markets, OPEC+ is still deliberating on a date for their meeting, but Saudi's energy minister delivered a strong signal that the current slump in oil markets pushed prices below the Falih put strike.