(23 AUGUST 2018)DAILY MARKET BRIEF 2:Oil up as US-China talks resume

Crude oil prices are bouncing from recent low, benefitting from a weakening dollar and from China’s threatened 25% duties on US gasoline, diesel and other refined products. As a Chinese delegation started discussion with US trade representatives in Washington on Wednesday, market sentiment is improving, pushing oil upward since the beginning of the week. US crude inventories drop in the week ending August 18 also support the trend: API and EIA estimates at -5.17 million barrels and -5.84 million (consensus: -1.50 million and -1.86 million) confirm a large US inventory draw.

Medium-term, US sanctions against Iran, the third largest OPEC producer, are supporting the idea of lower supply across the board. Iran’s largest oil client, China, is not expected to back the US, while India and Turkey (second and fourth largest Iran clients) will probably follow China. The US Department of Energy, in anticipation of Iran sanctions, will offer 11 million barrels from the Strategic Petroleum Reserve between 1 October and 30 November.

Trading at USD 67.70 per barrel, West Texas Intermediate crude is expected to decline slightly in the short-term, heading along 67.30.

By Vincent Mivelaz