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Oil rises, heads for weekly drop on surplus, demand concerns

Oil rises, heads for weekly drop on surplus, demand concerns

Mubasher: Oil prices edged up on early Friday, but they were heading expectedly towards a weekly loss on worries about oversupply and waning demand driven by a potential economic slowdown that was brought about by the trade dispute between Washington and Beijing.

Global Brent crude futures went up $0.7% to $72.65 per barrel (pb) compared to their last session, after jumping to $73.04 pb, as US Nymex futures climbed $0.14 to $69.60 pb from the last close, following a high of $70.03.

Nevertheless, both contracts are on track to a weekly fall on the back of fears regarding oversupply triggered by the return of some production to market after worldwide disruptions, while the trade conflict between the United States and China, the world’s largest two oil consumers, led to worries about damage to their economies and commodities demand.

Fears about the US and China mounted again at the time when China’s currency slips, OANDA brokerage’s APAC trading head Stephen Innes told Reuters.

“Risk sentiment is wobbling, which I believe is attributed to PBOC [The People’s Bank of China] pushing the RMB [yuan] complex lower via the fix,” Innes said, adding that markets are now in turmoil not only over a potential trade war, “but also a currency war.”

The PBOC lowered further the yuan for the seventh consecutive trading session to a 13-month low, while Beijing seemed not ready to curb its currency depreciation.

Saudi Arabia moved to allay oversupply worries as the the kingdom’s Organization of the Petroleum Exporting Countries (OPEC) governor Adeeb Al-Aama stated that Saudi exports are set to drop by almost 100,000 barrels per day (bpd).

“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, adding that fears over substantial oversupply by his country and its allies are unfounded.

It is worth noting that Baker Hughes is due to release its data pertaining count drill count in the US later in the day.

By 7:43 am GMT, Brent crude futures rose 0.95% to $73.27 pb, while Nymex futures climbed 0.98% to $70.14 pb