Oil prices rise over possible postponement of tariffs on Mexico, OPEC cuts

Oil falls as trade worries mount Saudi comments limit losses

On Wednesday, Brent and WTI hit their lowest levels since mid-January at $59.45 and $50.60, respectively, after US crude production hit a new record high and stockpiles hit their highest since July 2017.

Sentiment for oil remains dim as fresh signs emerge of a stalling global economy, with the trade war between the USA and China intensifying. Traders were looking for a 1.7 million barrel draw down.

WTI had fallen to a session low of $50.66 after the report, the lowest level since January 15. Brent supply is being controlled by the OPEC-led supply cuts and the USA sanctions against Iran and Venezuela. Brent also extended gains after its settlement and was last up $1.67, or 2.8%, at $62.30/Bbl. It sunk earlier to a five-month low of $59.45.

The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as some non-affiliated producers including Russian Federation, known as OPEC+, have been withholding oil supply since the start of the year to prop up the market.

In gasoline, the authority reported a build of 3.2 million barrels for the week to May 31.

By Alex NussbaumWest Texas Intermediate crude entered a bear market and Brent tumbled below $60 after USA petroleum inventories ballooned, raising fears of a glut as trade disputes threaten demand. Total petroleum stockpiles grew by about 22 million barrels last week, the biggest jump going back to 1990, marking a three decade high.

"Ample supplies come on top of growth concerns related to the trade dispute escalation and put pressure on oil prices for the time being", Norbert Rücker, head of economics at investment bank Julius Baer, said in a note.

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USA oil inventories are a critical marker for investors who are looking at a balance being created in markets. However, Saudi Arabia remains below its production limit as part of the OPEC+ deal, and Riyadh has been much more cautious about pumping more oil into a weakening market.

Matthew Smith, who tracks crude cargoes for New York-based Clipperdata said there was barely anything positive in the EIA data. "We of course want to drive inventories down", he said.

Overall, crude oil is around 20% below 2019 highs reached in late April, with May posting the first monthly drops since November.

"This would be unbearable to America, Europe, and the USA allies like Japan and South Korea".

President Donald Trump's threat last week to impose tariffs on Mexico beginning next Monday broke the last vestiges of the oil market's resilience.

(Graphic: U.S. crude inventories, weekly changes since 2017 png link: https://tmsnrt.rs/2XlX17b). Trump said he will start with a 5% tariff on Mexico and raise that to 25% unless the flow of undocumented migrants and drugs from across the border stop.

Saudi Arabia has cut supply by more than required by the OPEC+ deal in a bid to stop inventories building up.

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