Good morning. Oil is riding high on a possible extension on the deadline for a deal to settle the trade dispute between the world’s two largest economies. Meanwhile, the U.S. has been spared the sting of inflation as low energy prices have kept the economy in check.
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OIL GETS A BOOST FROM THE PAUSE IN SINO-AMERICAN TRADE TENSIONS
Crude received a boost on Wednesday on signs that the U.S. will extend the deadline for a trade deal with China, reports the WSJ’s Sarah McFarlane.
Brent crude, the global oil benchmark, was trading up 1.3{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}, at $63.24 a barrel, on London’s Intercontinental Exchange. West Texas Intermediate futures, the U.S. oil standard, were up 1{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}, at $53.63 a barrel, on the New York Mercantile Exchange.
Oil was also supported by the International Energy Agency monthly report that said global supply fell sharply in January. Supply fell by 1.4 million barrels a day to 99.7 million barrels in January due to plummeting supply from the Organization of the Petroleum Exporting Countries.
The fall was driven by reductions in Saudi Arabia, the U.A.E. and Kuwait as OPEC members turned down the taps to meet a supply agreement struck last year.
ENERGY PRICES HOLD DOWN OVERALL U.S. INFLATION
U.S. consumer prices were flat at the beginning of the year for the third month in a row, a sign that volatile oil prices are helping to hold down inflation, write Sharon Nunn and Sarah Chaney.
The consumer-price index, which measures what Americans pay for goods and services such as washing machines and haircuts, remained the same in January when compared to the previous month, the Labor Department said Wednesday. However, when excluding the volatile food and energy categories, so-called core prices grew 0.2{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} from December.
Economists surveyed by The Wall Street Journal had expected overall prices to grow 0.1{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in January and core prices to grow 0.2{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}.
In the longer term, prices throughout the economy grew 1.6{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in January from the beginning of last year, the smallest year-over-year increase since the middle of 2017. Core prices, on the other hand, grew 2.2{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} over the year for the third consecutive month, signaling underlying inflation pressures in the economy are remaining steady.
Energy prices tanked 3.1{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} in January from the prior month, offsetting price growth in other major categories Americans spend their money on. This helped hold down overall inflation. Prices in all major energy components, including gasoline and electricity, declined from December. Food prices, which sometimes skews the headline inflation figure, grew by 0.2{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}.
On the other hand, prices for shelter, which includes rent, apparel and medical care grew.
ONE POTENTIAL BENEFICIARY OF U.S. SANCTIONS ON VENEZUELA: IRAN
The Trump administration’s sanctions on Venezuelan crude complicate its effort to bring Iran’s oil exports to zero, writes the Journal’s Benoit Faucon.
To avoid a price spike, Washington will likely be forced to allow some buyers to continue purchasing oil from Tehran, experts say.
The U.S. administration banned the purchase of crude from the Venezuelan government of Nicolás Maduro in late January, just two months after it implemented an embargo on Iran’s oil exports. At the time, the White House issued waivers to eight nations, allowing them to continue purchases of Iranian fossil-fuels until April. The move blunted a possible price spike ahead of U.S. midterm elections.
Meanwhile, the U.S. Treasury Department released guidance in an attempt to clarify confusion over trading in the Venezuelan bond market that has resulted in the wake of new sanctions, writes Samuel Rubenfeld.
The sanctions, imposed in late January, blocked U.S. investors from buying bonds issued by the state-run oil company, Petróleos de Venezuela SA, or PdVSA, but allowed investors to hold on to previously purchased debt and to sell bonds to foreign entities.
The Treasury didn’t initially make clear how it could facilitate the sales to foreigners, leading to a halt in trading. The Treasury clarified Monday that U.S. companies or individuals could serve as custodians as another U.S. person or entity works to divest their holdings in Venezuelan bonds.
BIG NUMBER: 29 MILLION
OPEC’s share of the global oil market continues to decline as the oil cartel’s output stagnates and U.S. producer’s ramp up, according to analysts at Bank of America Merrill Lynch.
The bank forecasts OPEC supply to fall over the medium term, from 31.9 million barrels a day in 2018 to around 29 million in 2024 and its market share to follow suit, reports the Journal’s Georgi Kantchev.
SOURCE: MoneyBeat – Read entire story here.
