United States crude oil refinery inputs increase last week

Oil prices steady, US-China trade dispute remains in focus

Oil prices steadied on Wednesday after falling at the start of the session, with the potential for damage to the global economy and fuel demand from the intensifying China-US trade dispute continuing to cast a shadow over the market.

Brent crude futures LCOc1 were down $2.38, or 4%, at $56.56 a barrel by 10:36 a.m. CDT (1536 GMT), setting a fresh seven-month low.

Tensions ramped up over the past week as President Trump communicated his intent to impose 10 percent tariffs on the remaining $300 billion worth of goods coming into the USA from China.

Oil prices fell early in the session on worries about the trade war, then extended losses after government data showed a build of 2.4 million barrels in USA crude stockpiles last week, instead of the 2.8 million-barrel draw analysts had expected.

US President Donald Trump on Tuesday dismissed fears the trade row with China could be drawn out.

He added that with current low crude prices, investment has "probably been reduced, and supply will balance the market a little bit". The forecast of stable crude oil prices is the result of EIA's expectations of a relatively balanced global oil market.

In its current Short Term Energy Outlook, the U.S. Energy Information Administration anticipates a narrower differential between Brent and WTI crude prices for the rest of the year and into 2020.

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Over the past four weeks, crude oil imports averaged about 6.92 million b/d, down by 1.21 million b/d year-on-year, while crude oil exports averaged about 2.57 million b/d, up by about 740,000 b/d year-on-year.

Elsewhere, data indicating a larger-than-expected drop in United States crude stocks offered some support to oil prices.

The U.S. also responded to a decline in China's yuan currency Monday by branding China a currency manipulator, with Beijing then accusing the U.S. of causing chaos in financial markets.

Meanwhile, Saudi Arabia Energy Minister Khalid Al-Falih and US Energy Secretary Rick Perry on Tuesday said both sides expressed concern over threats targeting freedom of maritime traffic in the Arabian Gulf as they met in Washington.

"We believe the oil market is starting to price in the fear of a severe and multi-year breakdown in U.S". The narrowing spread reflects EIA's assumption that crude oil pipeline transportation constraints from the Permian Basin to refineries and export terminals on the U.S. Gulf Coast will ease in the coming months.

In the middle of July, the possibility of an imminent Fed rate cut and the flaring-up of the Iran-West tensions in the Middle East and the world's most important oil shipping lane, the Strait of Hormuz, resulted in hedge funds buying petroleum futures at the fastest pace in almost a year in the week to July 16, according to exchange data compiled by Kemp.

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