LONDON (Reuters) – Oil rose towards $69 a barrel on Friday after two sessions of losses but remained on track for its biggest weekly drop of the year, pressured by rising inventories and concern over an economic slowdown.
FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada, July 21, 2014. REUTERS/Todd Korol/File Photo
U.S. crude inventories rose to their highest since July 2017, suggesting ample supplies in the world’s top consumer [EIA/S], with prices also hit by worries that the U.S.-China trade conflict is developing into a more entrenched dispute.
“Clearly, bargain hunters are back in town,” Naeem Aslam, chief market analyst at TF Global Markets, said of the bounce.
“However, it is still set to record the worst week of the year and this is due to the increase in trade war tensions between the U.S. and China.”
Brent crude, the global benchmark, rose 75 cents to $68.51 a barrel by 1341 GMT but remained on course for a weekly decline of about 5%. U.S. West Texas Intermediate crude added 79 cents to $58.70.
Even so, supply cuts – both voluntary and those resulting from U.S. sanctions – kept a floor under prices and some analysts expect the market to recover.
“It is reasonable to doubt whether Saudi Arabia will be willing to step up its output given the latest decline in prices,” analysts at Commerzbank said. “We therefore expect to see higher oil prices again in the near future.”
The Organization of the Petroleum Exporting Countries and allies including Russia, an alliance known as OPEC+, have been cutting supply since January to tighten the market and prop up prices.
U.S. 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.
Brent’s price structure remains in backwardation, with prices for prompt delivery higher than those for later dispatch, suggesting a tight balance between supply and demand.
UBS kept a forecast for Brent to again reach $75 this month for a 2019 high, citing tighter supplies.
“Compliance of OPEC and its allies to the production cut deal remains high, while production from Iran and Venezuela is likely to again trend lower this month,” analyst Giovanni Staunovo wrote in a report.
Additional reporting by Henning Gloystein; Editing by Alexander Smith and David Goodman