Why China Hasn’t Raised Tariffs on U.S. Oil

Oil prices extend decline on growing supplies

Oil prices climbed more than 1% on Friday ahead of long USA and United Kingdom holiday weekends, but posted the biggest weekly drop of the year, pressured by rising inventories and worries about the global economy.

Brent crude, the global benchmark, rose 98 cents to $68.74 a barrel at 1121 GMT but remained on course for a decline of almost 5% this week.

US crude oil inventories rose last week, hitting their highest levels since July 2017, the government's Energy Information Administration said on Wednesday.

West Texas Intermediate crude for July delivery fell 53 cents, or 0.9 per cent, to $60.89 a barrel on the New York Mercantile Exchange at 7:24am in London after being down as much as 63 cents earlier.

Industry data had also shown a surge in USA crude stockpiles.

The stock market continued its volatile downward spiral on Thursday fueled by fears of a worsening trade war between the USA and China. "But with that said, it's driving season and that means you get an overwhelming spike in demand in the US and everywhere else", said Bob Yawger, director of futures at Mizuho Securities USA.

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Traders are saying that the sell-off that put the markets in a position to post their biggest weekly loss this year was caused by concerns over rising US stockpiles and worries that the U.S.

Global geopolitical risk was still sufficient to provide a floor for oil prices, said Again's Kilduff.

US sanctions on the oil industries of Iran and Venezuela, both OPEC members, have curbed their crude exports, reducing supplies further than envisaged in the OPEC+ deal. The research firm's reading from its survey of services companies also slumped to a 39-month low of 50.8, fanning fears of a broad economic slowdown in the U.S. that could temper demand for oil. While there's no shortage of supply risks - including the possibility that the Organisation of Petroleum Exporting Countries will extend its output curbs or that rising tension in the Middle East will disrupt energy flows - swelling USA stockpiles are mitigating those concerns.

While many macro investors and generalists watch outright oil prices move higher or lower, specialized oil traders tend to monitor term structure, or, the spread between contract months as an indication of supply and demand.

OPIS Energy Analysis Global Head Tom Kloza on the outlook for oil prices. The Director's Cut also reports that drilling permit activity has returned to normal, operators continue to maintain a permit inventory that will accommodate varying oil prices for the next 12 months.

By way of a reminder, at the end of past year, a "glut" is reported to have helped contribute to the fact that oil prices took a significant tumble to that $45 per barrel mark, that we all would like to forget happened.


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