Oil Steady Amid Trade War Concerns, Signs of Tight Inventory

Oil was steady as concerns over the fallout from the U.S.-China trade dispute and higher supply from OPEC balanced some signs of tightness in the market.

West Texas Intermediate futures slipped 0.4 percent, and are little changed this week. Escalating threats between President Donald Trump’s administration and Chinese officials are fanning worries that both economic activity and fuel demand could be impaired. Prices climbed on Thursday after data provider Genscape Inc. this week signaled that crude stockpiles at the biggest U.S. storage hub of Cushing, Oklahoma, may fall further from the lowest level in almost four years.

Oil slumped more than 7 percent last month as a trade spat between the U.S. and China weighed on prices, with Beijing on Friday retaliating against Trump’s latest threat by planning tariffs of about $60 billion in American goods. While looming U.S. sanctions against Iran look set to tighten global crude supplies, there are signs of a surplus emerging as other members of the Organization of Petroleum Exporting Countries and the group’s allies boost output.

“The current trade war between the U.S. and China continues to take headlines and cause uncertainty,” said Michael Poulsen, an analyst at Global Risk Management Ltd.

Tightening Market

West Texas Intermediate crude for September delivery declined 20 cents to $68.76 a barrel on the New York Mercantile Exchange as of 8:13 a.m. local time, after rising $1.30 on Thursday. Total volume traded Friday was about 27 percent below the 100-day average.

Brent for October settlement traded at $73.42 a barrel on the London-based ICE Futures Europe exchange, down 3 cents. Prices are 1.8 percent lower this week. The global benchmark traded at a $5.89 premium to WTI for the same month.

Sliding Stockpiles

Crude inventories at the Cushing hub fell 1.1 million barrels from July 27 to July 31, a Genscape report was said to show. That comes after the Energy Information Administration’s data showed Cushing stockpiles fell last week for an 11th straight time to the lowest level since October 2014.

“Crude storage at Cushing will remain low,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “Refinery runs will stay high over the summer” while “the opportunity to export U.S. crude oil eastwards remains in place.”

Meanwhile, Iran started a major exercise in the Strait of Hormuz involving more than 50 small boats, practicing swarming operations that could potentially shut down the waterway if ever deployed for real, Fox News reported, citing U.S. officials. Iranian officials have alluded to the possibility of disrupting traffic in the strait while the Trump administration pressures Iran’s oil customers to cut off purchases.

About 30 percent of the world’s seaborne-traded crude passes through the strait. U.S. Central Command said in a statement that it’s monitoring the situation.

Other oil-market news:

China rebuffed requests from the U.S. to reduce imports of Iranian oil, although it did agree not to ramp up purchases, according to two officials familiar with the negotiations. Commerce Secretary Wilbur Ross signaled there’s more pain ahead unless China changes its economic system, as the Asian nation repeated it will never surrender to U.S. trade threats. China’s largest refiner, Sinopec, will hold off on buying U.S. crude as an escalating trade war between Beijing and Washington threatens to make American imports more expensive, according to a person familiar with the matter. Saudi Arabian Oil Co. reduced monthly pricing to most markets as the world’s biggest oil exporter boosts supply to meet customer demand.