Oil Higher in Early Thursday Trade

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange (NYMEX) oil futures and Brent crude on the Intercontinental Exchange reversed higher early Thursday after consolidating lower overnight, climbing with the start of equities trading in the United States, with major equity indices gaining. Oil futures have moved in concert with equities recently.

The upside push comes as worry over a trade war between the United States and China fade following comments late Wednesday by newly installed National Economic Council Director Larry Kudlow. Kudlow said there is no trade war between the United States and China, and that there is the possibility that the tariffs announced by China would not go into effect, as President Donald Trump wants to resolve trade issues through negotiation.

Phil Flynn, senior market analyst with The Price Futures Group, highlighted a tweet from Trump agreeing with his new NEC director. "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S."

Kudlow's remarks sparked a massive reversal in equities markets on Wednesday, with the Dow Jones Industrial Average spiking more than 700 points from the day's low to a more than 250-point advance on the session. The Dow was up more than 100 points in early trade, and the S&P 500 Index edged higher.

In early trading, NYMEX May West Texas Intermediate were up about 50 cents near $63.90 barrel (bbl), with the June Brent contract on ICE nearly 70 cents higher at near $68.70 bbl. May RBOB futures were more than 1.0 cent higher near $1.9885 gallon, while the May ULSD contract broke free of the downside to edge up 0.5 cent to near $1.9825 gallon.

The move higher comes as record high U.S. crude production is countered by strong domestic demand.

The Energy Information Administration (EIA) on Wednesday reported domestic crude production ramped up for the sixth consecutive week during the final week in the first quarter to a fresh record high of 10.46 million barrels per day (bpd), up 968,000 bpd from the first week of 2018. The EIA also reported total U.S. oil products implied demand reached a five-month high during the same week at 21.217 million bpd, with the demand pace 1.075 million bpd or 5.5% faster than during the first quarter 2017.

EIA reported U.S. crude exports at a 2.175 million bpd record high for the week reviewed, only the third week that U.S. crude exports have topped 2.0 million bpd since restrictions on exports were lifted in December 2015.

Brian L. Milne can be reached at brian.milne@dtn.com

(BE)

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