Published: Mon, August 06, 2018
Money | By Hannah Jacobs

Oil trades near $68 as inventory, Opec outputs weigh on market

Oil trades near $68 as inventory, Opec outputs weigh on market

Oil prices were down on Friday as the market re-focused on bearish longer term factors following a bounce in the previous session as US crude inventories in a key hub fell to their lowest in almost four years.

A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018.

U.S. West Texas Intermediate (WTI) crude CLc1 futures increased by 6 cents, or 0.1 percent, to $67.72 a barrel.

Brent crude was on track to post a fourth week of declines in five on Friday, with the global oil benchmark poised to slip more than 1 percent amid continued volatility in the energy market. The market expected 1.3 million barrels of gasoline draw.

US crude oil exports averaged 1.31 million barrels per day last week, down by 1.37 million barrels per day from the previous week. "A lot of this is the risk premium priced in for Iran and when do we start seeing an impact on supply there", Patterson said.

American oil production in May actually inched down from April by 0.3 percent, according to EIA's Monthly Crude Oil and Natural Gas Production report.

China's International United Petroleum and Chemicals (Unipec) has also suspended purchases of U.S. crude amid the growing trade row, sources said.

"Chinese demand from the independent refiners is also lower while the escalating trade war also doesn't help sentiment", said Warren Patterson, commodities strategist at ING. China has said it will retaliate.

The amount of oil supplied to the market in July was slightly higher at 10.380 million bpd, the sources said.

The weekly estimates for May all point to more than 10.7 million bpd of crude oil production, but the more accurate-albeit lagged-data, based on survey of producers, shows that US oil output had trailed projections by around 300,000 bpd.

Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production, as agreed at a meeting in June, to help to compensate for an anticipated shortfall in Iranian crude supplies once USA sanctions take effect.

Even with last week's rise, overall US crude inventories are below the 5-year average of around 420 million barrels.

The U.S. Energy Information Administration (EIA) on Wednesday reported a large build in crude oil inventories and a production decline in the week ending July 27.

US drillers cut rigs for the second week in three, reducing the number of oil rigs by two to 859. Iranian officials have warned the country would not easily yield to a renewed USA campaign to strangle Iran's vital oil exports. "Yet, we remain much more concerned about the ongoing USA sanctions on Iran", analysts at Bank of America Merrill Lynch said in a research note published last week.

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