Oil prices mixed; Brent eases as trade tensions weigh

Fredrick Soto
August 4, 2018

USA refineries produced about 10.5 million barrels of gasoline a day last week, up about 200,000 barrels compared to the prior week.

The sharp fall in U.S. oil stocks is tempering concerns of oversupply and indicating that the global supply-demand picture may remain favourable.

Oil slipped below $74 a barrel on Wednesday pressured by an industry report that U.S. stockpiles of crude rose unexpectedly and by higher Opec production, adding to indications of more ample supply.

According to Phil Flynn of the PRICE Futures Group in Chicago, that was a sign the market might avoid an all-out loss of Iranian oil when US sanctions kick in by November.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries agreed to raise supply in a meeting last month to meet rising global demand, but the group did not specify a clear target for the output increase.

us crude futures CLc1 were down 44 cents, or 0.6 percent, at $68.32 a barrel, having dropped almost 2 percent on Tuesday.

Brent crude oil futures were at $74.03 per barrel, down 0.24 percent, U.S. West Texas Intermediate (WTI) crude futures were down 0.51percent, at $68.41 a barrel, according to RIA Novosti.

Brent fell more than 6 percent in July, while USA crude futures slumped about 7 percent, the biggest monthly decline for both benchmarks since July 2016.

Oil prices started the week with slight gains due to U.S. President Donald Trump's statements of threatening Iran with potential intervention.

US inventories are forecast to have fallen by 3 MMbbl last week, according to a Bloomberg survey of analysts before government data due Wednesday.

Oil retreated in NY, heading for its biggest monthly loss since March 2017, as some of the supply risks facing the market abated. In June, the member countries agreed to return compliance to 100%, which meant producers with spare capacity would increase their output to offset involuntary declines in Venezuela and elsewhere.

The U.S. imposed 25 percent tariffs on $34 billion of Chinese products in early July, and the review period on another $16 billion of imports ends Wednesday.

Saudi Arabia last week said it was suspending oil shipments through the Red Sea's Bab al-Mandeb strait, one of the world's most important sea routes for crude oil, after Yemen's Iran-aligned Houthis attacked two ships in the waterway.

Investors were cheered by a Bloomberg News report that senior U.S. and Chinese officials are seeking to restart negotiations to end an escalating trade war.

Geopolitical tensions have roiled the crude market, sending Brent prices higher since mid-July as global supplies tighten. Last week, Saudi Arabia suspended oil shipments through the strait after the Houthi group attacked Saudi oil tankers.

Concern over slowing economic growth because of a trade dispute between the United States and China is also putting downward pressure on the market.

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