Oil Steadies With Glut Expectations, Trade War Souring Outlook

(Bloomberg) -- Oil steadied after a modest decline on Tuesday as expectations for a glut, and the trade war between the world’s two biggest economies weighed on the demand outlook.

Brent crude traded below $65 a barrel after slipping 0.3% in the previous session, with West Texas Intermediate near $61. The International Energy Agency slashed its forecasts for global oil consumption this year and next as trade frictions rise. Supply additions are likely to be more than enough to satisfy demand, it said in a monthly report.

The industry-funded American Petroleum Institute reported US nationwide crude inventories rose by 2.4 million barrels last week, which would be the third consecutive advance if confirmed by official data later Wednesday. However, the report indicated declines at the oil storage hub in Cushing, Oklahoma, and in fuel inventories.  

Crude remains near the lowest in four years, after a sharp drop earlier this month brought about by an onslaught of tariffs and counter-levies between the US and its biggest trading partners. Trump on Tuesday launched a probe into the need for import taxes on critical minerals, while struggling to bridge trade differences this week with the European Union as White House officials said the bulk of the US tariffs imposed on the bloc won’t be removed. 

“While we may have seen a peak in headline tariff rates, the intensifying standoff between the US and China is casting a long shadow over global demand expectations,” said Charu Chanana, chief investment strategist for Saxo Markets Pte. “The uncertainty around retaliatory measures and supply chain disruptions is weighing on risk appetite and, in turn, on the oil market.”

Chinese economic growth, meanwhile, showed surprising strength early in the year with a sharp uptick in March, data released on Wednesday showed, although the outlook remains murky because of the ongoing trade impasse with the US.

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