Crude-oil prices retreated early Friday and were on track to book a weekly loss for the first time in three weeks, a day after the U.S. benchmark contract suffered its lowest settlement in more than a week amid signs of rising production in Saudi Arabia and protracted trade tensions between the United States and China, according to monitored reports.
Brent crude, the global benchmark, was down 19 cents at $77.20 a barrel while U.S. crude slipped 2 cents to $72.92.
August West Texas Intermediate crude, the U.S. benchmark, on the New York Mercantile Exchange, fell 55 cents, or 0.8 percent to $72.39 a barrel.
For the week, WTI oil is set to shed 2.4 percent, while Brent is on track for a weekly slide of 3.5 percent, according to FactSet data. Both contracts had logged back-to-back weekly gains.
A US government report on crude stockpiles rising 1.3 million barrels showing unexpectedly ample supplies after analysts had forecast a decline also weighed on prices this week.
Similarly, the Organisation of Petroleum Exporting Countries (OPEC) report indicated that Saudi Arabia raised oil output by almost 500,000 barrels per day last month.
US president, Trump in a series of tweets, is reported to have called for Saudi officials, which represent the most influential oil producer in OPEC, to help pump more crude and lower prices. OPEC and its allies, namely Russia, had agreed in a June meeting to effectively raise output by 1 million barrels a day to help counteract lost barrels from Venezuela and Iran.
According to analysts, escalating tensions between China and the U.S., with the two largest economies in the world implementing tariffs $34 billion on their respective imports and the threat of more action, could weigh on crude prices and soften demand expectations.
U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the two world’s biggest economies on a path toward a full-blown trade conflict.
“The oil market is in the hands of global politics,” said Norbert Ruecker, head of macro and commodity research at Julius Baer. “China’s reciprocation will in a first tranche include agricultural commodities and in a second tranche most likely oil products and crude oil.”
The potential trade war between the United States and China comes amid a tight oil market. Oil output cuts by OPEC and allies, including Russia, since January 2017 have reduced a glut of crude.
Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although OPEC has now started to ease those curbs with Saudi Arabia pumping more.
Even so, renewed U.S. sanctions on Iran against its oil exports look set to tighten supply further.
South Korea, a major buyer of Iranian oil, will not lift any in July for the first time since August 2012, three sources familiar with the matter said on Friday.