Oil prices rise with Wall Street; US crude discount widens

Reuters: Oil prices rose on Thursday as the equities markets rallied and as market participants weighed a rise in US crude inventories and production against continued OPEC supply curbs.

Prices for the more actively traded June Brent crude futures were up 58 cents to settle at $69.34, while the May contract expiring on Thursday was up 74 cents at $70.27.

West Texas Intermediate (WTI) crude futures gained 56 cents to settle at $64.94.

WTI’s discount to Brent has grown to more than $5 a barrel, the biggest since January, making Brent-linked crudes less attractive to refiners.

Oil has risen about 4% since January, on track for the longest stretch of quarterly gains since late 2010.

“The equities market is rallying and that’s lending support to oil,” said Philip Streible, senior market strategist at RJO Futures in Chicago. All three major US stock indexes were positive on Thursday.

The dollar against a basket of currencies was flat on Thursday, which was supportive for crude prices, said Streible. A weaker greenback makes dollar-denominated commodities cheaper for holders of other currencies.

Strong compliance on supply cuts from members of the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia have pushed up prices. OPEC sources said the group and its allies are likely to keep their deal on cutting output for the rest of 2018.

But growing supply in the United States is pressuring prices. Commercial US stocks rose 1.6 million barrels in the past week, while output hit a record 10.43 million barrels per day (bpd).

“I looked at the inventory report as not bearish,” said Bill Baruch, President of Blue Line Futures in Chicago. “We actually drew down more from products than from crude.”

Geopolitical concerns, especially tensions between Saudi Arabia and Iran, continued to prop up the market, said Gene McGillian manager of market research at Tradition Energy in Stamford. Meanwhile, “worries about demand being affected by a possible trade war kind of receded,” he said.

But, the gains may be fragile, said Petromatrix strategist Olivier Jakob.

“The price action last week was pretty clear. The objective on that move was to take out the highs of 2018, but that has not been done and the price action of the last three days has not been very convincing.”

China stocks post worst quarterly fall in two years, trade worries weigh

Shanghai (Reuters): China’s major stock indexes ended slightly higher on Friday, but posted their worst quarterly losses in two years, as the country’s fund managers slashed equity exposure amid China-US trade tensions. 

At the close, the Shanghai Composite index was up 0.3% at 3,168.90, while the blue-chip CSI300 index CSI300 index inched up 0.1% to 3,898.50. The smaller Shenzhen index ended up 1.29% and the start-up board ChiNext Composite index was higher by 3.16%. For the week, SSEC gained 0.5%, while CSI300 slipped 0.2%. 

For the quarter, SSEC and CSI300 slumped 4.2% and 3.3%, respectively, their worst quarterly falls since March 2016. Worrying that the China-US trade spat could bring uncertainties to the world’s second largest economy and its capital markets, Chinese fund managers slashed their suggested equity exposure for the next three months to an 18-month low. 

China warned the United States on Thursday not to open Pandora’s Box and spark a flurry of protectionist practices across the globe, even as Beijing pointed to US goods that it could target in a deepening Sino-US trade dispute. 

“Market participants are starting to worry about (China’s) economic growth and liquidity conditions for the whole year of 2018, given the fallout from China-US trade tensions, financial regulations and Beijing’s deleveraging efforts,” said a South China-based fund manager.