Oil futures rose 1 percent on May 8, boosted by a surprise drawdown in US crude stockpiles, but an escalating US-Chinese trade fight limited oil's gains as investors anxious about the global outlook for energy demand.
Amidst the growing trade tension between the USA and China, while global markets are suffering, this has turned out to be good for gold. Overall crude inventories, not including the SPR, fell to 466.6 million barrels from their highest levels in 19 months. The demand is expected to rise by 1.5 million b/d in 2020, up from expected growth of 1.4 million b/d in 2019.
Bank of America Merrill Lynch (NYSE:) said it expected Saudi Arabia "to bring back oil production slowly as Iranian barrels exit the market", adding that overall it saw Brent crude oil prices having a floor at $70 per barrel in current market conditions.
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"We had two big geo-political events over the weekend, one is the news from Iran with USA carrier, bombers group headed to Middle East and all the stuff with China about tariffs", said Bob Haberkorn, senior market strategist at RJO Futures.
Equities rallied and the US dollar weakened following the report, which also supported oil futures. USA gold futures were up 0.2 percent at $1,283.90 an ounce.
Washington has also slapped sanctions on Venezuelan oil exports, further disrupting crude supply. India imported 23.9 mt of crude oil from Iran in FY19, making the Gulf country the third biggest exporter of oil after Iraq and Saudi Arabia.
Scarcer heavy and sour crudes are being snapped up by USA refineries in the run-up to the summer, and May imports from Nigeria and Angola along with Iraq and Brazil are expected at about 1.23 million bpd - the highest in 18 months.