Oil falls towards $77 a barrel due to higher Saudi production

London — Oil slipped towards $77 a barrel on Friday, under pressure from higher Saudi production and trade tensions between the US and China, although oil supply disruptions lent support.

Top exporter Saudi Arabia told oil cartel Opec it raised oil output by almost 500,000 barrels per day (bpd) last month, Opec sources said, a sign Riyadh wants to make up for shortages elsewhere and dampen prices.

Brent crude, the global benchmark, was down 19cs at $77.20 a barrel by 9.10am GMT. US crude slipped 2c to $72.92.

“On the bearish side both Saudi Arabia and Russia are living up to their promise to increase output,” said Tamas Varga of oil broker PVM. “Looming US sanctions on Iran, however, are causing serious concerns among market players.”

US tariffs on $34bn in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the world’s two biggest economies on a path towards a full-blown trade conflict.

“The oil market is in the hands of global politics,” said Norbert Rücker, head of macro-and commodity research at Julius Bär. “China’s reciprocation will, in a first tranche, include agricultural commodities, and in a second tranche, most likely oil products and crude oil.”

A US government report also weighed on prices this week, with crude stockpiles rising 1.3-million barrels and showing unexpectedly ample supplies after analysts had forecast a decline.

The potential trade war between the US and China comes amid a tight oil market. Oil output cuts by Opec and allies, including Russia, since January 2017 have reduced a glut of crude. Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although Opec has now started to ease those curbs with Saudi Arabia pumping more.

Even so, renewed US sanctions on Iran against its oil exports look set to tighten supply further. South Korea, a major buyer of Iranian oil, will not lift any in July for the first time since August 2012, three sources familiar with the matter said on Friday.

Reuters

Source: businesslive.co.za