Oil edges higher as U.S. auto proposal counters bearish rig data
Pubdate：2018-07-31 09:05
Source：liyanping
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TOKYO (Bloomberg) -- Oil edged higher near $69/bbl on prospects a U.S. overhaul of car efficiency rules will increase fuel consumption, countering concerns over potential gains in American supply.
Futures in New York rose as much as 0.5%, following a fourth straight weekly drop last week. U.S. federal regulators said their proposal to roll back U.S. mileage targets would increase the nation’s fuel consumption by 500,000 bpd. While the draft plan may be bullish for prices, Baker Hughes data on Friday showed the number of oil rigs in America rose last week, a sign there could be a ramp-up in future production.
Oil has declined about 7% this month on concern that a trade war between the U.S. and China will hurt global economic growth that underpins energy demand. Investors are also monitoring by how much the Organization of Petroleum Exporting Countries and its allies will boost output to make up for potential supply disruptions in Iran and other nations, as well as whether record American shale production could weigh on prices.
“An increase in oil demand spurred by the proposed overhaul of fuel efficiency standards could offset rising U.S. output and reduce the nation’s exports,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. “With the Permian shale play showing little growth amid the pipeline crunch, concerns remain that crude output in the U.S. could temporarily slow down.”
West Texas Intermediate crude for September delivery rose as much as 36 cents to $69.05/bbl on the New York Mercantile Exchange and traded at $69.03 7:45 a.m. in London. The contract fell 2.5% to $68.69 last week. Total volume traded was 44% below the 100-day average.
Brent for September settlement traded at $74.48/bbl on the London-based ICE Futures Europe exchange, up 19 cents. The contract climbed 1.7% to $74.29 last week. The global benchmark was at a $5.43 premium to WTI.
Futures for September delivery were up 0.5% to 509.2 yuan a barrel on the Shanghai International Energy Exchange. The contract gained 2.7% last week.
U.S. regulators are poised to propose a dramatic overhaul of tough efficiency rules set during the Obama administration. Under the proposal, new cars and light trucks would be required to average about 37 mi/gal from 2020 through 2026, instead of increasing over time to roughly 47 mpg under standards adopted by the previous administration, according to the draft.
Meanwhile, U.S. working oil rigs rose by three to 861 last week, according to Baker Hughes data. While the number of rigs in the Permian basin also increased, pipeline capacity constraints in the region remains a major challenge. Cabot Oil & Gas Corp. was pushed to stop spending money on exploring America’s hottest shale play amid pipeline jams and soaring costs.
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