LONDON: Oil slipped below $77 a barrel 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, a sign Riyadh wants to make up for shortages elsewhere and dampen prices.
Brent crude LCOc1, the global benchmark, was down 83 cents at $76.56 a barrel by 14:03 GMT. U.S. crude CLc1 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 U.S. sanctions on Iran, however, are causing serious concerns amongst market players.”
U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed Friday and Beijing has vowed to respond immediately in kind, setting the two world’s biggest economies on a path toward a full-blown trade conflict.
“The U.S.-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 U.S. government report also weighed on prices this week, showing crude stockpiles rose by 1.3 million barrels, while analysts had forecast a decline.
Nonetheless, the potential trade war between the U.S. and China comes amid a tight oil market.
Oil output cuts by OPEC 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 U.S. 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 Friday.