Oil ‘steady’ in face of contradictory signals

Brexit deal boosts euro, sterling

LONDON, Oct 19, (RTRS): Oil prices were broadly steady on Friday as concern over slower growth in China, the world’s biggest oil importer, was countered by bullish signals from both the Chinese and US refining sectors and a North Sea crude disruption that proved temporary.

Benchmark Brent crude oil futures moved between negative and positive territory, trading down 3 cents to $59.88 a barrel by 1328 GMT.

US West Texas Intermediate (WTI) crude futures edged up by 35 cents to $54.28. The contracts were on track for weekly declines of about 1% and 0.7% respectively.

The Forties oil and gas pipeline system (FPS) in the British North Sea reopened as planned on Friday after being halted for a few hours by a power surge resulting from a lightning strike, operator Ineos said.

The system transports the Forties crude oil stream that makes the biggest contribution to the Brent benchmark.

Sending bearish signals, China’s economic growth slowed to 6% year on year in the third quarter, its weakest for 27-1/2 years and below expectations, dogged by soft factory production and continuing trade tensions with the United States.

China’s September refinery throughput, however, was up 9.4% year on year at 56.49 million tonnes, boosted by new refineries and some independent refiners resuming operations after maintenance.

US and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month, US Treasury Secretary Steven Mnuchin said on Wednesday.

Falling

In the United States, falling product stocks countered higher US crude oil stocks, which rose by 9.3 million barrels in the week to Oct. 11. That compared with expectations for an increase of 2.9 million barrels.

“The actual key takeaway from the report was that the US is inching closer to energy independence,” PVM analysts said in a note. “The country was a net exporter for crude and refined products for a second consecutive week for the first time on record.”

Elsewhere, the joint technical committee monitoring a global oil production pact between the Organization of the Petroleum Exporting Countries (OPEC) and partners found that compliance is being exceeded, with cuts for September representing 236% of agreed quotas, sources said.

OPEC and its allies, including Russia, have agreed to limit oil output by 1.2 million barrels per day (bpd) until March 2020.

OPEC lowered its 2019 global oil demand growth forecast to 0.98 million bpd while leaving its 2020 demand growth estimate unchanged at 1.08 million bpd, its latest monthly report said.

Meanwhile, the dollar fell sharply against the euro on Friday as the common currency jumped on hopes that a Brexit deal between Britain and the European Union could improve the odds of the eurozone avoiding a recession for now.

In one of the most striking flourishes of the three-year Brexit drama, British Prime Minister Boris Johnson confounded his opponents on Thursday by clinching a new deal with the EU, even though the bloc had promised it would never reopen a treaty it agreed last year.

The euro has been rattled this year by dismal manufacturing data and by worries that deepening economic tensions between the United States and China could slow eurozone economies even further.

Bloc

But with Britain’s Johnson and EU leaders agreeing a new deal for Britain to exit the bloc, and no recent bad news on the US-China trade front, the euro was getting a boost.

“While the results of tomorrow’s vote is far from certain, we see the progress made over the past week as diminishing the chances of a no-deal Brexit,” said John Doyle, vice president for dealing and trading at Tempus Inc in Washington.

“A no-deal Brexit would be devastating for the UK economy, but the ripple effects into the mainland would be substantial,” Doyle said. “That has helped lift equity markets, regional currencies and put downward pressure on the greenback.”

The euro was up 0.32% at $1.1158, a near two-month high.

The respite for the euro comes as US economic data have grown increasingly gloomy, a development that could see the US Federal Reserve cut interest rates later this month, its third rate cut this year.

Poor domestic data makes deeper cuts in US interest rates a touch more likely, Tempus’ Doyle said.

The dollar index, which compares the dollar against six major currencies, was down 0.31%. For the week, the index was down 1%, its worst weekly performance in 17 weeks.

Money markets are pricing in an 82% chance of a rate cut at the Oct. 30 meeting, Refinitiv data show.

The pound was 0.45% higher against the dollar at $1.2946 on Friday, even as doubts remained about whether the proposed Brexit deal will get through the British parliament in Saturday’s vote.