Oil heading for another weekly loss due to trade disputes

Tokyo/Moscow — Oil prices rose on Friday but are heading for yet another weekly decline as concerns intensify that trade disputes and slowing global economic growth could hit demand for petroleum products.

Brent crude oil futures were up 65c at $72.09 a barrel by 11.18am GMT. US West Texas Intermediate (WTI) crude futures rose 36c to $65.82.

Brent was still heading for a 1% decline for the week, a third consecutive weekly drop. WTI, meanwhile, is on track for a seventh week of losses with a fall of more than 2%. The main drag on prices is the darkening economic outlook on the back of trade tensions between the US and China, and weakening emerging-market currencies weighing on growth and fuel consumption, traders and analysts said.

US investment bank Jefferies said on Friday that there is a “lack of demand” for crude oil and refined products from emerging markets, while Singaporean bank DBS said that Chinese data showed a “steady decline” in activity and “the economy is facing added headwinds due to rising trade tensions”.

Bank MUFG, meanwhile, said that the weakening Turkish lira will constrain further growth in petrol and diesel demand this year.

“Although emerging-market contagion and China slowdown fears seem somewhat overstated, neither fundamentals nor sentiment should provide support for higher commodity prices,” Julius Bär head of macro-and commodity research Norbert Rücker said.

Furthermore, just as demand seems to be slowing, supply looks to be rising, increasing the drag on markets.

US government data this week showed a large build up in crude inventories, with production also increasing. “Investors remain cautious as Wednesday’s surprise gain in US stockpiles remain fresh in their minds,” ANZ bank said on Friday.

A weekly report on US drilling activity is due to be published later on Friday by energy services firm Baker Hughes.

Despite the bearish factors, analysts said prices were prevented from falling further because of US sanctions against Iran, which target the financial sector from August and will include petroleum exports from November.

Said Jefferies, “Iranian crude exports were still near 2-million barrels per day (bpd) in July and will likely begin to fall dramatically in August with financial sanctions taking effect. With oil export sanctions now three months out, we expect exports to fall by more than 500,000 bpd by the end of the third quarter.”

Reuters