Oil Futures Mixed on Large Crude Draw, US-China Tariffs

    

   WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil 
futures and Intercontinental Exchange Brent futures are trading in narrow 
ranges with West Texas Intermediate and Brent near four-month highs Thursday 
morning, pushed up by a large drawdown in U.S. commercial crude oil inventories 
reported midweek, while the upside was capped by concerns over a prolonged 
U.S.-China trade dispute.

   NYMEX WTI May contract was down $0.10 near $60.13 bbl, trading near a $60.39 
four-month spot high. ICE Brent May futures traded $0.39 lower at $68.11, 
edging off a $68.69 four-month spot high. NYMEX ULSD April futures lost 1.15cts 
to trade at $1.9966 gallon, with RBOB futures flat at $1.9166, edging off a 
$1.9209 five-month spot high.

   Oil futures posted sharp gains Wednesday afternoon as the Energy Information 
Administration reported a 9.6 million bbl drop in U.S. commercial crude 
inventories during the week-ended March 15, leaving stocks at the lowest level 
since early January. 

   The steep drawdown in U.S. crude oil stocks comes amid surging U.S. crude 
exports, up 846,000 bpd to 3.392 million bpd in the profiled week, and ongoing 
production cuts from Organization of the Petroleum Exporting Countries. Amid an 
increasingly tightening global oil market, U.S. oil inventory and product 
stocks have dropped 45.21 million bbl or 3.6% since mid-January when they 
reached a 15-month high to a 1.2219 bbl to a 6-1/2 month low last week. A 
year--on-year surplus in crude stocks narrowed a sharp 22.827 million bbl or 
67% during the last four weeks.

   Thursday morning, the gains were capped by investors' growing concerns over 
the prolonged trade war between the United States and China following comments 
from U.S. President Donald Trump that U.S. tariffs on Chinese imports could 
stay in place for a "substantial period of time." Trump said on Wednesday that 
he would maintain tariffs on Chinese imports, even if a bilateral trade deal 
with Beijing is reached in order to ensure compliance with terms, which could 
mean years of negotiations and punitive tariffs.

   The Trump administration has imposed 25% tariffs on $50 billion in Chinese 
imports and a 10% tax on $200 billion in goods, while China is seeking the 
removal of both sets of tariffs. Wednesday's remarks did not specify which sets 
of tariffs would be kept in place for compliance assurances. 

   While the markets already priced in the trade-war resolution, the possible 
extension sent the S&P 500 Index falling from above 2,850, the highest level 
since October. In midmorning trading, the S&P 500 and Dow Jones Industrial 
Average have rebounded, posting modest advances in early trading.

   Wednesday's conclusion of the two-day Federal Open Market Committee meeting 
has also offered mixed support for the markets, with the Fed maintaining the 
federal funds rate in a range between 2.25% and 2.5% and suggesting the bank is 
unlikely to increase rates in 2019. Federal Reserve Chairman Jerome Powell told 
reporters Wednesday that the bank has a "positive" outlook for the U.S. 
economy, but persistently low inflation and slowness in the global economy 
dictate a cautious approach with rate adjustments. The last increase was a 25 
basis point boost to 2.5% in December that sparked a widespread selloff in 
equities and commodities.

   The central bank also downgraded its projections of U.S. gross domestic 
product growth in 2019 to 2.1% from its December estimate of 2.3%. Following 
the FOMC meeting, the U.S. dollar plunged to a seven-week low, while firming 
0.3% in midmorning index trading to 96.22. 

   Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, www.dtn.com. (c) 
2019 DTN. All rights reserved.