Heading into the second week of February, oil prices fell after US drilling activity increased and a fire shutdown a major US refinery. Of course, concerns over the US and China trade relationship are not relieving any strain from the OPEC-led supply restraint.
With that, Benchmark Brent oil was down 59 cents, nearly 1 percent, to $61.51 per barrel. Unfortunately, US West Texas Intermediate crude oil (WTI) also fell—nearly 90 cents, or 1.78 percent—to $51.78 per barrel.
According to JBC Energy, “Oil prices are still trying to figure out what lead to follow. On the one hand, there is the OPEC+ cut story, now coupled with increasing issues around Venezuelan supply.”
The Vienna-based consultancy goes on to say, “At the same time, it has to be argued that a lot of the economic data that has been released over the last few days has really not been too encouraging, and US-Chinese trade talks are also seemingly not progressing very fast.”
Just last week, US energy firms had to up the number of oil rigs in operation for the second in the last three weeks. This shoring up of equipment certainly indicates US crude production is still on the rise. However, WTI prices are still struggling because of the second closure of the large crude distillation unit at Phillips 66’s Wood River, Illinois refinery, where the fire shutdown production.
Still, the conflict between the US and China continues to make things difficult. Now back from a week-long holiday, Chinese oil traders will be looking for any headway that can help them to make decisions about moving forward with oil prices. For one, we already know that the Chinese import tariff will increase from 10 percent to 25 percent, on March 1, 2019 (on all trade valued at $200 billion).
Of course, China has already warned it will definitely retaliate if the US does, in fact, impose this tariff. And if this happens, it will undoubtedly cultivate the already growing fears that global growth will continue to slow; and that, most importantly, means oil demand will slow.