Published: Tue, January 14, 2020
Economy | By

Oil Dips On Easing US-Iran Tensions, Eyes On China Trade Deal

Oil Dips On Easing US-Iran Tensions, Eyes On China Trade Deal

Brent crude was down 60 cents at $64.38 per barrel at 11:57 a.m. CST (1757 GMT), while West Texas Intermediate (WTI) crude was down 65 cents at $58.39 a barrel.

Despite the US crackdown on Chinese tanker companies dealing with Iranian oil, China continues to import oil from the Islamic Republic, but in much smaller volumes than it used to, before the USA ended all waivers for all Iranian oil customers in May past year. WTI was also down 9 cents, or 0.2 per cent, at Dollars 58.95 a barrel.

Oil prices turned negative for the year after dropping on Monday as traders and investors focused on the possibility of oversupply in crude amid dissipating tensions that initially threatened tanker movements in the Middle East.

"This year, however, the pace is expected to pick up again and is to average at 1.25 million bpd".

China has pledged to buy more than $50 billion in energy supplies from the United States over the next two years, according to a source briefed on a trade deal. "In case of a trade deal upward revisions can be anticipated", Varga said.

Easing geopolitical tensions aside, analysts said oil prices were also pressured by worries that crude supplies could balloon from seasonal lows in demand.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened U.S.

Brent hit four-month highs of $71.75 last week, while WTI surged to an eight-month peak of $64.72, reacting to the Tehran action which was in retaliation to the United States killing of top Iranian general Qasem Soleimani on January 3.

"As geopolitical tensions take a back seat for now, we may see more of the same in the short term", Tchilinguirian told the Reuters Global Oil Forum.

Indeed, on Monday the USA heating oil crack spread HOc1-CLc1 (a measure of the profit margin for refining crude into other products), fell to $21.56, the weakest in nearly five months.

One area of concern with regards to inventory is that US refinery margins for petroleum products are thin, particularly as winter demand for heating oil has been middling and gasoline margins have deteriorated.

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