Oil futures moved higher early Friday, but remained on track for weekly losses after data earlier this week marked a surprise jump in U.S. crude inventories and as a stronger dollar this week underlined concerns about demand growth.
Crude found support Thursday and remained buoyant on Friday as the U.S. and China prepared to resume trade talks next week, though expectations for a breakthrough remained low. West Texas Intermediate crude for September delivery CLU8, +0.46% on the New York Mercantile Exchange was up 39 cents, or 0.6%, at $65.85 a barrel. The U.S. benchmark was on track for a 2.6% weekly decline.
The global benchmark, October Brent crude LCOV8, +0.85% rose 78 cents, or 1.1%, to $72.21 a barrel on the ICE Europe exchange. Brent is nursing a 0.8% weekly loss.
“The unexpectedly sharp rise in U.S. crude oil stocks that was reported on Wednesday by the U.S. Department of Energy is continuing to pressure prices,” wrote Eugen Weinberg, head of commodity research at Commerzbank, in a note.
Traders are awaiting weekly rig-count data from oil-field services firm Baker Hughes, used as a guide to the direction of U.S. crude output, later in the session.
The government on Wednesday reported a 6.8 million barrel rise in U.S. crude inventories, defying expectations for a decline of around 2.4 million barrels. Crude futures extended losses after the data in Wednesday’s session, joining a broader commodity rout tied in part to as strengthening U.S. dollar, leaving WTI to end at a 10-week low and Brent to post its lowest close since early April. Oil recovered some lost ground in Thursday’s session.
“The oil market has not been spared from the macro-induced weakness, and while [Wedneday’s] counter-seasonal crude inventory build did not help, concerns of a firming U.S. dollar have also created anxiety on the prospects of oil demand growth,” wrote analysts at RBC Capital Markets.
That’s because a weakening domestic currency “spells trouble for major emerging-market growth countries like India where consumers are already paying near record levels for retail petrol. The Indian rupee fell to all-time lows this week,” they noted.
As a result, Brent prices have risen by 55% over the past 12 months when denominated in the local currency, they said, while notional oil prices have increased by only 40%.
Weinberg said there remained worries that trade tensions between the U.S. and China, the world’s two largest oil consumers, could weigh on global demand. Meanwhile, on the supply front, crude production in Libya is set to bounce back to more than 1 million barrels a day again for the first time since June as production at the country’s largest oil field returns toward normal levels, Weinberg said, citing S&P Global Platts.
The temporary closure of four key oil terminals and the suspension of oil production at Sharara saw Libyan oil production dip below 500,000 barrels per day at times in the summer. That said, experience in recent years suggests that repeated disruptions to Libyan oil supply should be expected.
In other energy trade, September gasoline RBU8, +0.39% rose 0.5% to $1.9965 a gallon, while September heating oil HOU8, +0.79% rose 1% to $2.1164 a gallon. September natural gas NGU18, +1.00% was up 0.6% at $2.926 per million British thermal units.
