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Oil posted a third weekly loss on Friday, as Saudi Arabia’s reassurances that it won’t flood the global crude market failed to offset a 4.2 per cent price drop at the start of the week.
Futures pared gains in New York on Friday amid concern that escalating trade rows would undermine energy demand. President Donald Trump said that he’s “ready to go” with tariffs on $500 billion. He also accused China and the European Union of manipulating their currencies to keep interest rates low, causing the dollar to weaken.
Crude had risen earlier after Saudi Arabia, under pressure from Trump to lower prices by pumping more, said they will keep exports steady this month and reduce them by 100,000 barrels a day in August.
“The latest from Trump about maybe increasing the tariffs on imports from China” is raising concern, said James Williams, president of London, Arkansas-based energy researcher WTRG Economics. “If not a weaker economy here, than a weaker economy in China, that’s a big fear.”
West Texas Intermediate crude for August delivery, which expired Friday, rose $1 to settle at $70.46 a barrel on the New York Mercantile Exchange. It has lost 0.8 per cent last week. Total volume traded was about 38 per cent below the 100-day average. The more-active September contract rose 2 cents to $68.26.
Crude has retreated about 5 per cent this month as the escalating trade war between the US and China rattled global financial markets. Trump’s tweets Friday coincided with a weakening of the dollar. The Bloomberg Dollar Spot Index fell as much as 0.8 per cent, the most since March. A weaker dollar “should increase the demand internationally for oil,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “A break in the dollar is a big help.”
The drop in the price of oil this week was aided by Libya restoring halted output and the US signalling it may show some flexibility in sanctions on Iranian oil. That’s prompted concern the extra crude promised by Saudi Arabia might not yet be needed.
The US oil benchmark closed above its 50-day moving average on Thursday after slipping below that level earlier this week. Brent for September settlement rose 49 cents to $73.07 on the London-based ICE Futures Europe exchange. The contract is down 3 per cent this week. The global benchmark traded at a $4.81 premium to WTI for the same month.
Saudi Arabia’s pledge to keep its crude exports steady from June to July, and reduce it in August, follows an agreement last month between Opec and its partners including Russia to boost production by 1 million barrels a day. The kingdom’s assurance clashes with signals it gave out shortly after last month’s Opec meeting, when people briefed on its output policy said it planned record production of 10.8 million barrels a day.
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The Gulf Today
Oil futures contracts are set to decline to about $60 a barrel in 2023. Baseline assumptions for the IMF’s average petroleum spot prices, based on futures prices, suggest average annual prices of $69