Traders appear to focus more on the details of the supply and demand than with the more prominent narratives, including the health of economic growth and global inventories.

Still, oil remains buoyed by optimism that a sustained recovery in energy demand is underway, boosted by US government data showing crude oil, gasoline, and distillate inventories all declined the week-ending August 7.

The US-China six-month review of the trade agreement has been delayed due to a scheduling issue with a new date not yet set.

There is some risk this could also be to see if China follows through with its commitment to accelerate crude oil imports from the US. Still, affirmation rumours were circulating in the markets Friday and pushed WTI higher.

For good measure, Reuters confirmed those rumours reporting “US crude oil shipments to China would rise sharply in the coming weeks, after US traders, shipbrokers and Chinese importers said.”

China’s oil imports

China increasing US oil imports is the most apparent trade deal reaffirmation. From a trade talk risk perspective, wiping down the last remnants of escalation risk is favourable for oil prices.

Despite the stimulus package appearing to be in a standstill, the markets appear to be taking the view that major fiscal legislation is inevitable, presumably based on the assumption that the Republicans will eventually accept a somewhat larger package in light of their incentive to support the economy ahead of the November election, where President Trump is trailing in the polls.

Misses for China’s July retail sales and industrial production data dampened enthusiasm in the oil markets Friday. Still, prices recovered after a solid US July retail sales print in what could be best described as a bit of a global macro data saw off Friday.

As far as the China miss is concerned, the markets will continue to run with bad news is good news narrative in the sense than any data misses is a cry out for more stimulus, even more so from the People’s Bank of China (PBoC) who has been somewhat constrained with their policy measure relative to other global central banks.

If the PBoC turns on the taps a little more, it should ultimately be good for oil markets.

Global oil demand stabilising

Russia’s Energy Minister Alexander Novak said the global oil market is stabilising gradually, so no need to ease OPEC+ output cuts ahead of schedule. OPEC+ has delayed its Joint Ministerial Monitoring Committee by a day to August 19.

Still waiting for US stimulus package

Given the US Congress’ failure to reach an agreement on the contours of the next fiscal package and with the Democratic and Republican nominating conventions taking place over the next couple of weeks, a deal is unlikely to materialise until the end of the month at the earliest and anything other would be a huge positive surprise for the oil market.

To be sure, this presents a problem for the 28 million Americans receiving employment wage subsidy in July and who, on the face of it if they have not found employment, had their monthly income shaved by over 60 % in August.

Indeed, not a great way to end the summer driving season and as the rolling lockdowns around the globe are never far from oil trader minds. And it is while the acceleration of new cases worldwide is becoming part of the discussion and may cause some slowing in European activity in the coming weeks.

Unlike in the US some weeks ago, it is harder to argue that the worst-hit European countries had tempted fate by re-opening too much compared to their neighbours and so less impactful for oil prices.

With futures contracts hovering near the high of its two-month trading range, bullish traders are having a hard time forging out a new higher range because of lingering demand concerns.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp