London — Oil rose towards $69 a barrel on Friday after two sessions of losses, but remained on track for its biggest weekly drop this year due to rising inventories and concerns of an economic slowdown.
US crude inventories rose to hit the highest since July 2017, suggesting ample supplies in the world’s top consumer. Meanwhile, worries that the US-China trade is developing into a more entrenched dispute have also hit prices.
“Clearly, bargain hunters are back in town,” Naeem Aslam, chief market analyst at TF Global Markets, said of the bounce. “However, it is still set to record the worst week of the year and this is due to the increase in trade war tensions between the US and China.”
Brent crude, the global benchmark, rose 85c to $68.61 a barrel at 8.57am GMT. It was still set for a decline of more than 5% this week. US West Texas Intermediate (WTI) crude added 75c at $58.66.
Some analysts expect gains to be short-lived.
“Without a resolution to the ongoing trade dispute quickly, which now looks very unlikely, oil could struggle to push higher,” Jasper Lawler, head of research at futures brokerage London Capital Group, said.
Even so, supply cuts — both voluntary and those resulting from US sanctions, kept a floor under prices.
Oil cartel Opec and allies including Russia, an alliance known as Opec+, have been cutting supply since January to tighten the market and prop up prices.
US sanctions on the oil industries of Iran and Venezuela, both Opec members, have curbed their crude exports, reducing supplies further than the Opec+ deal aimed to.
Brent’s price structure remains in backwardation, in which prices for prompt delivery are higher than those for later dispatch, suggesting a tight balance between supply and demand.
UBS kept a forecast for Brent to again reach $75 — the year’s high — this month, citing tighter supplies.
Analyst Giovanni Staunovo wrote in a report, “Compliance of Opec and its allies to the production-cut deal remains high, while production from Iran and Venezuela is likely to again trend lower this month.”