Oil rises, but is on track for third weekly decline

Tokyo — Crude prices rose on Friday but were set to drop for the week as the concern about oversupply and lower demand due to a possible economic slowdown caused by the trade conflict between the US and China, the world’s two biggest oil users.

Brent oil rose 7c to $72.65 a barrel by 3.54am GMT, after rising to $73.04 earlier in the day.

US West Texas Intermediate (WTI) was up 14c at $69.60 a barrel, after reaching a high of $70.03 earlier.

However, both benchmarks are on track for their third weekly loss, after big declines on Monday, with Brent set to drop 3.6% and WTI to fall by 2%. Prices have been dragged down by concerns about oversupply as some production returned after outages, while trade tension between the US and China stoked fears of damage to their economies and commodities demand.

Saudi Arabia had moved on Thursday to allay fears of oversupply, which had supported prices.

But concerns about US and China were coming to fore again as China’s currency falls, said Stephen Innes, head of trading Asia-Pacific at Oanda brokerage.

“Risk sentiment is wobbling, which I believe is attributed to PBoC [People’s Bank of China] pushing the RMB complex lower via the fix,” Innes said.

“Markets are now nervous, not only about a trade war, but also a currency war.”

The PBoC on Friday lowered its midpoint for the yuan for the seventh consecutive trading day to the lowest in a year.

With China showing little signs of arresting its currency’s depreciation, the yuan promptly retreated to a near 13-month low.

Lower oil demand in the US and China caused by an economic slowdown from their trade war would have oversized impacts on the market.

The US accounted for 20.2% of global oil demand in 2017 while China consumed 13% of the world’s oil last year, according to the BP Statistical Review of Energy.

There was some support for prices based on comments from Saudi Arabia, the world’s biggest oil exporter, that it would cut crude shipments.

The country expected exports to drop by about 100,000 barrels a day in August as it worked to ensure it did not push oil into the market beyond customers’ needs, the kingdom’s Opec governor Adeeb Al-Aama said.

“Despite the international oil markets being well balanced in the third quarter, there will still be substantial stock draws due to robust demand and seasonality factors in the second half,” Al-Aama said in a statement.

He also said concerns that Saudi Arabia and its partners were moving to substantially oversupply the market were “without basis”.

Reuters