Brent declines ahead of Trump-Xi meeting

The front-month ICE Brent contract has declined by $1.08/bbl on the day, to trade at $106.24/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent’s price has found some support after the US Energy Information Administration (EIA) reported a decline in US crude stocks.

Commercial US crude oil inventories decreased by 4.3 million bbls to 452.9 million bbls in the week ending 8 May, according to data from the EIA.

“In the US, EIA weekly data continued to show a tightening in the domestic oil market,” two analysts from ING Bank said. “The draw is driven by continued strength in crude oil exports,” they said.

The American Petroleum Institute (API) reported a 2.2 million bbl-decline the previous day.

A decline in US crude stocks typically indicates improvement in demand for oil and can put some upward pressure on Brent's price.

Downward pressure:

Brent’s price has moved lower ahead of US President Donald Trump’s meeting with Chinese counterpart Xi Jinping this week.

“The oil market is eagerly awaiting the outcome of the meeting between President Trump and President Xi, and whether it could yield some positive results on the Iran war,” ING Bank’s analysts said.

The meeting – during Trump’s state visit to Tiananmen Square in Beijing – is expected to include high-level discussions on the rapidly evolving Middle East situation, while also laying the groundwork for deeper long-term cooperation between the two sides.

Some market participants hope China can pressure Iran into reaching an agreement with the US that will potentially end the conflict and allow energy flows through the Strait of Hormuz to resume.

“The market could be pinning too much hope on the US-China talks yielding some positive results on Iran,” ING Bank’s analysts added.

By Aparupa Mazumder

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