Oil slips below $77, weighed down by Saudi output boost, trade tensions

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Oil slipped below $77 a barrel on Friday, under pressure as higher Saudi production and trade tensions between the United States and China offset support from oil supply disruptions.

Top exporter Saudi Arabia told OPEC it had raised oil output by almost 500,000 barrels per day last month, OPEC sources said.

Brent crude, the global benchmark, was down 83 cents at $76.56 a barrel by 1403 GMT. US crude slipped 43 cents to $72.51.

“On the bearish side both Saudi Arabia and Russia are living up to their promise to increase output,” said Tamas Varga of oil broker PVM. “Looming US sanctions on Iran, however, are causing serious concerns amongst market players.”

US tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the two world’s biggest economies on a path towards a full-blown trade conflict.

“The US-China trade dispute is set to intensify as neither side is prepared to back down,” said Abhishek Kumar, senior energy analyst at Interfax Energy.

A US government report also weighed on prices this week, showing crude stockpiles rose by 1.3 million barrels, while analysts had forecast a decline.

US-China trade war

Nonetheless, the potential trade war between the United States and China comes amid a tight oil market.

Oil output cuts by the Organization of Petroleum Exporting Countries and allies including Russia since January 2017 have reduced a glut of crude.

Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although OPEC has now started to ease those curbs with Saudi Arabia pumping more.

Even so, renewed US sanctions on Iran against its oil exports look set to tighten supply further.

South Korea, a major buyer of Iranian oil, will not lift any Iranian crude and condensate in July for the first time since August 2012, three sources familiar with the matter said on Friday.