Oil Falls 2% On Rising Supply, Concern About Trade Tensions

The USA through May 2018. The upward surge has stalled for the last two months. U.S. production was down 30,000 bpd in May

Oil prices strengthened Thursday, with USA crude gaining almost 2 percent after traders saw an industry report suggesting domestic crude stockpiles would soon decline again after a surprise rise in the latest week.

On Wednesday, prices sank when the USA government reported that in the prior week, total US inventories rose 3.8 million barrels, while supplies at Cushing fell 1.3 million barrels.

"Oil has been rebounding every time prices fall to near $68 since mid-July", Makiko Tsugata, a senior analyst at Mizuho Securities Co., said by phone.

Smith noted while it's highly unlikely India will absorb China's share of USA crude, "we could see other East Asian destinations, such as Taiwan and South Korea, also picking up some of the slack".

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.

Futures fell for the third day in NY, losing as much as 1.1 per cent to hit their lowest level since June 22, but USA government's data showed a surprise gain in nationwide stockpiles on Wednesday.

Futures reversed course after falling early in the session on concerns about oversupply.

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Crude oil production from the Organisation of Petroleum Exporting Countries increased last month as Saudi Arabia pumped near-record volumes to make good on a pledge to consumers that demand would be met.

Alongside Russia, OPEC kingpin Saudi Arabia and other members of the Middle-East dominated oil cartel agreed in late June to begin increasing production by up to 1 million barrels per day starting in August.

"Oil is holding up reasonably well. 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.

The kingdom has been under acute pressure from President Donald Trump to open the taps as he chokes off exports from Saudi's political rival, Iran. Iranian officials have warned their country would not easily yield to a renewed US campaign to strangle oil exports.

"A clear definition around the macros is what the market is looking for and until we get that, it is likely to be volatile in the range", said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

Oil prices are feeling the effects of ongoing tensions over global trade, with markets concerned about any slowdown in growth around the world. China has said it will retaliate. China's Unipec, the trading arm of state oil major Sinopec, has suspended crude oil imports from the United States due to a growing trade spat between Washington and Beijing, three sources familiar with the situation said on Friday. Senior Iranian officials have warned the country would not easily yield to a renewed USA campaign to strangle Iran's vital oil exports.

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