Oil prices head higher as Saudi Arabia lifts prices, China crude imports climb

The Saudis “had been offering steep [oil] discounts to secure market share, but an increase in price suggest the Saudis believe demand destruction has bottomed out in Europe,” said Phil Flynn, senior market analyst at The Price Futures Group.

Meanwhile, China’s imports rose to 10.42 million barrels a day in April from 9.68 million in March, according to Reuters data. Overall imports for the world’s second-largest economy and the biggest oil importer were down 14.2% from the year-ago period. However, exports from the country grew an unexpected 3.5% from the previous year.

That data boosted demand prospects as restrictions due to the COVID-19 pandemic are being lifted, while investors also expect a slowdown in production by global oil producers,

Oil is up “on hopes on rebounding demand,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note.

West Texas Intermediate crude for June delivery CL.1, 1.63% CLM20, 1.58% on the New York Mercantile Exchange, rose 95 cents, or 3.9%, to $24.93 a barrel after trading as high as $26.74. It settled 2.3% lower on Wednesday to snap a five-session streak of gains.

Global benchmark July Brent crude BRNN20, 1.38% picked up 66 cents, or 2.2%, at $30.38 a barrel on ICE Futures Europe, following a 4% decline in the prior session.

Meanwhile, the U.S. looked to ease back its military presence in Saudi Arabia, with the Wall Street Journal reportingthat the U.S. is removing Patriot anti-missile systems from the kingdom and considering reductions in other military capabilities. The report said the U.S. also plans to remove dozens of military personnel that were sent to Saudi Arabia after a series of attacks on Saudi oil facilities last year, which the U.S. blamed on Iran.

“While this might be just a pullback from the post-refinery attack buildup…it also may be a message to the Saudis that their [recent price war with Russia] was not appreciated by U.S. lawmakers and leaders,” said Flynn.

“The Saudis may look like a short-term winner in the price war, but its damaged relations with the U.S. might make them a loser,” he told MarketWatch. “Tension been the Saudis and Iranians are still running high and a pull back from the U.S. military might give the Iranians some ideas.”

Traders also continued to keep on eye on rising domestic crude supplies. The EIA reported Wednesday that U.S. crude inventories rose 4.6 million barrels for the week ended May 1. The data, which excludes changes in the Strategic Petroleum Reserve, marked a 15th consecutive weekly rise, but was smaller than the average increase of 7.1 million barrels forecast by analysts polled by S&P Global Platts.

The EIA had also reported a rise of 1.7 million barrels in the SPR to 637.8 million barrels last week.

Oil is starting to flow into the SPR, “which may avert a U.S. oil storage overflow and substantially reduce the risk that oil prices in the U.S. will again crash below zero,” said Flynn. The flow of oil into the reserve was “one of the reasons that the increase in commercial crude oil inventories came in at a less than expected 4.6 million barrels from the previous week.”

Investors are also digesting the U.S. weekly jobless claims data Thursday which showed more than 3 million Americans lost employment, adding to the already 30 million figure that has been racked up over the past six weeks.

Some signs of easing tensions between China and the U.S. may also be providing a lift to crude prices, as Bloomberg News reported on Thursday that U.S. trade negotiator Robert Lighthizer and his counterpart Liu He are scheduled to have a call to discuss progress on a phase-one trade deal between the countries that had looked in jeopardy of being quashed by President Donald Trump.

Back on Nymex, June gasoline RBM20, 7.47% tacked on 5.8% to 92.73 cents a gallon and June heating oil HOM20, 3.70% rose 3.7% to 85.43 cents a gallon.

June natural gas NGM20, -1.75% moved down by 2.5 cents, or 1.3%, to $1.919 per million British thermal units.

The EIA reported Thursday that domestic supplies of natural gas rose by 109 billion cubic feet for the week ended May 1. On average, analysts expected a rise of 105 billion cubic feet, according to a survey conducted by S&P Global Platts.