Oil prices rose on Friday but were heading for yet another weekly decline as concerns intensified that trade disputes and slowing global economic growth could hit demand for petroleum products.
Brent crude oil futures LCOc1 were up 92 cents at $72.25 a barrel by 1237 GMT, after rising over $1 to hit a high of $72.44 a barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 59 cents to $66.05.
Brent was still heading for a 1-percent decline this week, a third consecutive weekly drop. WTI, meanwhile, is on track for a seventh week of losses with a fall of more than 2 percent.
The main 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 on Friday that there was a “lack of demand” for crude oil and refined products from emerging markets, while Singaporean bank DBS said that Chinese data showed a “steady decline” in activity and that “the economy is facing added headwinds due to rising trade tensions”.
Bank MUFG, 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.
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. [EIA/S]
“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 later on Friday by energy services firm Baker Hughes.
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.