Published: Mon, August 06, 2018
Markets | By Noel Gibbs

Oil prices looking for support as WTI tests back below $68

Oil prices looking for support as WTI tests back below $68

Brent oil futures steadied under $74 a barrel on Friday, holding onto gains from the previous session as trade concerns provided a headwind to a further rally.

The increase in American oil shipments follows the world's fifth-largest oil importer halting Iran crude loadings from July, ahead of USA sanctions, while its refiners are also seeking cheaper alternatives to Iraq's Basra crude.

Brent crude futures were at $73.15 per barrel, down 30 cents from their last close.

Oil prices went down on Friday amid rising supplies from countries including Russian Federation and Saudi Arabia.

Low U.S. stockpiles were still providing a floor for prices, with overall U.S. crude inventories below the five-year average of around 420 million barrels.

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Stocks at the key Cushing storage hub in Oklahoma fell by 1.3 million barrels, the lowest level since October 2014, according to data from the Energy Information Administration (EIA).

West Texas Intermediate crude for September delivery fell to as low as $66.92 per barrel and traded at $67.35 on the New York Mercantile Exchange at 8:57am local time.

Traders said prices rallied early when industry information provider Genscape reported that crude inventories at the Cushing, Oklahoma, delivery hub for USA crude, dropped 1.1 million barrels since Friday, July 27.

Phil Flynn, a market analyst at the PRICE Futures Group in Chicago, said in a daily emailed market report that was supporting the spike in prices on Thursday.

It produced about 11.21 million barrels per day, an increase of 140,000 from a month earlier, according to Bloomberg calculations based on the ministry's data. "A lot of this is the risk premium priced in for Iran and when do we start seeing an impact on supply there", ING commodities strategist Warren Patterson said.

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Crude prices remained supported by the prospect of an Iranian supply squeeze following the imposition of United States oil sanctions, with yesterday's rally stymied by short-term bearish supply factors that continue to weigh on prices. "There continues to be a concern that we might see a widening of the sanctions against China".

The price jump earlier this summer had come about in large part because of President Donald Trump 's decision to pull the US out of an worldwide agreement to curb Iran's nuclear program.

Oil prices are also feeling the effects of tensions over global trade, which could cause economic growth to slow.

"There are a lot of escalation points that could occur very quickly and that worries me", Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney, said.

Trump has turned up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion of Chinese imports.

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But a complete halt to Iranian supplies looks unlikely with Bloomberg reporting on Friday that China, Iran's biggest customer, has rejected a USA request to cut imports from the OPEC member.

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