Crude prices edged higher on Friday, but were heading for yet another weekly decline on worries that oversupply would weigh on the U.S. market and that trade disputes and slowing global economic growth would slow demand for oil.
U.S. crude was on track for its seventh consecutive weekly decline and global benchmark Brent was set to drop for a third week.
“One of the biggest concerns out there is that China’s demand numbers are coming down if China’s GDP growth is slowing,” said Tariq Zahir, managing member at Tyche Capital in New York.
Reuters reports that Brent crude oil futures LCOc1 were up 47 cents at $71.90 a barrel by 11:29 a.m. EDT (1529 GMT), after rising over $1 to hit a high of $72.44 a barrel.
U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 49 cents to $65.95, after touching a session high of $66.39 earlier.
For the week, Brent was heading for a 1.3 percent loss, and U.S. crude was down 2.5 percent.
Friday’s pull back from session highs came on mounting worries that U.S. crude inventories would post another consecutive gain, said Bob Yawger, director of futures at Mizuho Americas.
U.S. government data this week showed a large build up in crude inventories C-OUT-T-EIA, with production C-OUT-T-EIA also increasing.
“Investors remain cautious as Wednesday’s surprise gain in U.S. stockpiles remained fresh in their minds,” ANZ bank said on Friday.
A weekly report on U.S. drilling activity is due to be published at about 1 p.m. by energy services firm Baker Hughes. Last week, drillers added 10 oil rigs, the biggest rise since May.
Another major drag on prices was the darkening economic outlook on the back of trade tensions between the United States and China, and weakening emerging market currencies that are weighing on growth and fuel consumption, traders and analysts said.
U.S. investment bank Jefferies said there was a “lack of demand” for crude oil and refined products from emerging markets, while Singapore’s DBS bank said that Chinese data showed a “steady decline” in activity and that “the economy is facing added headwinds due to rising trade tensions”.
Japan’s MUFG Bank, meanwhile, said that the weakening Turkish lira will constrain further growth in gasoline and diesel demand this year.
“Although emerging market contagion and China slowdown fears seem somewhat overstated, neither fundamental nor sentiment should provide support for higher commodity prices,” Julius Baer 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.
Despite the bearish factors, analysts said prices were prevented from falling further because of U.S. sanctions against Iran, which target the financial sector from August and will include petroleum exports from November.
“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 3Q,” Jefferies said.
