Heightened trade tensions between the US and China weighed on economic outlooks and countered upward pressure from rising equities to keep oil lower in midmorning US trading Tuesday.
ICE December Brent was down 85 cents at $76.49/b and NYMEX December WTI was down 49 cents at $66.55/b. Brent futures had been trading as low as $75.9/b earlier in the session.
The market continued to weigh reports that the US is preparing to levy tariffs on all Chinese imports if bilateral talks between presidents Donald Trump and Xi Jinping fail to resolve trade disputes next month. Concerns over lower-than-expected demand growth as a result of a fall off in global trade sent oil markets lower on Tuesday.
But reports of rising consumer confidence added upward momentum to US equity markets, which had again opened lower on Tuesday. The Conference Board Consumer Confidence Index for October increased by 2.6 points from September to 137.9, indicating that recent market volatility has yet to impact overall consumer sentiment. The bullish report added upward pressure to oil futures, which were moving slowly higher in late-morning trade.
In addition to bearish trade war sentiment, the market is also eyeing a US inventory build this week. An S&P Global Platts analysis Monday showed that an uptick in refinery utilization likely failed to curb inventory builds last week, and analysts surveyed expected US crude supply to expand by 3.3 million barrels to 426.1 million barrels.
Rising US inventories in recent weeks has pushed the NYMEX crude structure into contango. Second and sixth month WTI contracts have been trading at a premium to prompt-month levels since mid-October.
But sharp price declines this week has extended the contango structure out the futures curve and on Monday prompt-month contracts fell to a 53 cent/b discount compared to twelfth-month levels. Early in US trading on Tuesday the twelfth-prompt month contango widened sharply to as much as $1.47/b before narrowing to around 20 cent/b later in the morning.
Product futures pared early losses amid rebounding equity markets, but were still trading below opening levels.
NYMEX November ULSD was down 1.08 cents at $2.2735/gal and NYMEX November RBOB was down 19 points at $1.8230/gal.
