Crude prices rose on Friday but were set to drop for the week as concerns about oversupply and lower demand due to a possible economic slowdown caused by the trade conflict between the United States and China, the world’s two biggest oil users.
Brent oil rose 7 cents to $72.65 a barrel by 0354 GMT, after rising to $73.04 earlier in the day.
U.S. West Texas Intermediate (WTI) was up 14 cents at$69.60 a barrel, after reaching a high of $70.03 earlier.
However, both benchmarks are on track for their third weekly loss, after big declines on Monday, with Brent set to drop 3.6 percent and WTI to fall by 2 percent.]
Prices have been dragged down by concerns about oversupply as some production returned after outages, while trade tensions between the U.S. and China stoked fears of damage to their economies and commodities demand.
Saudi Arabia had moved on Thursday to allay fears of oversupply, which had supported prices.
But concerns about U.S. and China are coming to fore again as China’s currency falls, said Stephen Innes, head of trading APAC at OANDA brokerage.
“Risk sentiment is wobbling, which I believe is attributed to PBOC pushing the RMB complex lower via the fix,” Innes said.”Markets are now nervous, not only about a trade war, but also a currency war.”
The People’s Bank of China (PBOC) on Friday lowered its mid-point for the yuan for the seventh straight trading day tothe lowest in a year.
With China showing little signs of arresting its currency’s depreciation, the yuan promptly retreated to a near 13-month low.
Lower oil demand in the United States and China caused by an economic slowdown from their trade war would have oversized impacts on the market.
The U.S. accounted for 20.2 percent of global oil demand in 2017 while China consumed 13 percent of the world’s oil last year, according to the BP Statistical Review of Energy.
There was some support for prices based on comments from Saudi Arabia, the world’s biggest oil exporter, that it would cut crude shipments.
The country expects exports to drop by roughly 100,000 barrels per day in August as it works to ensure it does not push oil into the market beyond customers’ needs, the kingdom’s Organization of the Petroleum Exporting Countries Governor Adeeb Al-Aama said.
“Despite the international oil markets being well balanced in the third quarter, there will still be substantial stock draws due to robust demand and seasonality factors in the second half,” Al-Aama said in a statement.
He also said concerns that Saudi Arabia and its partners aremoving to substantially oversupply the market are “withoutbasis”.