Energy Sector Update for 11/08/2019: BKR, XOM, CVX, RDS.A, RDS.B, BP, E, COP, TOT, PBR, PBR.A, EC, SLB, HAL, NOV, SPN

(Updates with the price move, EIA/IHS Markit reports and general market commentary from the first paragraph.)

Crude wavered on Friday after President Donald Trump contradicted Chinese comments that a mutual roll-back of import tariffs had been agreed as part of a phase one deal, endangering a much-awaited trade agreement between the world's two largest economies.

For the week, oil was slightly higher as the market kept gains recorded earlier this week when media reports speculated the partial deal between the two sides was within striking distance. West Texas Intermediate futures rose by less than 0.4% on Friday to $57.3, compared with its closing level a week ago of $56.2.

According to media reports Friday, President Donald Trump said a proposal to cut tariffs on Chinese imports as part of a partial agreement has not been agreed just yet. This follows Chinese Commerce Ministry spokesman Gao Feng's comments on Thursday, saying "top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement," Bloomberg reported.

This comes as Chinese customs data show crude imports surged by 11.5% year-over-year in October to a record high, damping expectations of higher demand for oil from China after a partial US-Sino trade agreement. Data from the General Administration of Customs show the world's biggest oil importer purchased crude equivalent to about 10.7 million barrels a day in the month, versus nearly 10.1 million barrels a day in September.

Meanwhile, the Energy Information Administration said Wednesday that crude stockpiles soared by 7.9 million barrels over a week to Nov. 1 - that compares with forecasts for a 1.5 million-barrel jump in a Reuters' survey of analysts. The inventories stood at 446.8 million barrels, the highest level since mid-August.

While crude stockpiles are surging, data compiled by energy services firm Baker Hughes Friday showed the number of oil rigs operating in the US dropped by seven to 684 in the week that ended on Nov. 8, the lowest level since April 2017. The combined oil and gas rig count in the US also fell by five to 817 as gas rigs were flat at 130.

In Canada, the number of oil rigs in operation increased by four to 97, and gas rigs were down by six to 43 during the week in review. As a result, the North American total was down by seven to 957 versus 1,277 a year ago, the data showed.

In a report on Wednesday, IHS Markit said the US shale production, the chief source of rapid growth that made the US the world's largest oil producer, is "slowing down fast."

The new IHS Markit outlook for oil market fundamentals for 2019-2021 expects total US production growth to be 440,000 barrels per day in 2020 before essentially flattening out in 2021. Modest growth is expected to resume in 2022.

"Going from nearly 2 million barrels per day annual growth in 2018, an all-time global record, to essentially no growth by 2021 makes it pretty clear that this is a new era of moderation for shale producers," Raoul LeBlanc, a vice-president at IHS, said. "This is a dramatic shift after several years where annual growth of more than one million barrels per day was the norm."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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