Oil traded lower in choppy Friday trade, but held on to a solid gain for the month, a day after U.S. benchmark prices topped $70 for the first time in about six weeks, with U.S. sanctions on Iranian oil expected to lead to tighter global crude supplies.
Industry participants await the weekly Baker Hughes BHGE, -2.35% rig-count data which will be released at 1 p.m. Eastern. Last week’s report showed the number of active U.S. rigs drilling for oil, a proxy for oil output, fell by nine to 860.
“Domestic crude oil production has been effectively flat since mid-June and that has removed one of the strongest headwinds on oil in 2018,” said Tyler Richey, co-editor of the Sevens Report.
October West Texas Intermediate crude on the New York Mercantile Exchange CLV8, -0.31% the U.S. oil benchmark, was off 34 cents, or 0.5%, at $69.91 a barrel. On Thursday, it settled above $70 a barrel to mark its highest finish since July 20, according to Dow Jones Market Data.
Global benchmark October Brent crude LCOV8, -0.28% which expires at the day’s settlement, shed 12 cents, or 0.2%, to $77.90 a barrel on ICE Futures Europe.
WTI’s October contract was on pace to post a weekly gain of 1.7%, and a monthly rise of 3.3%, while October Brent was set for a weekly rise of 2.2% and a monthly climb of 4.4%.
Most markets will be closed for trade on Monday in observance of Labor Day. Brent on the ICE Futures Europe exchange will be open for trading, but settle an hour early.
Crude moves this week have been mostly supported by potential disruptions to global crude supplies, including U.S. sanctions on Iran’s oil that take effect in early November.
On top of that, inventories in the U.S. have demonstrated signs of tightening. Earlier in the week, the Energy Information Administration reported that U.S. crude supplies declined by 2.6 million barrels for the week ended Aug. 24. That followed a drop of 5.8 million barrels reported by the EIA the week before.
Investors kept an eye on recent reports suggesting that President Donald Trump may yet follow through with tariffs on China, despite some signs that Beijing and Washington were angling toward productive negotiations to resolve differences over trade imbalances.
Bloomberg on Thursday reported that Trump wants to move ahead with his plan to place tariffs on $200 billion in additional Chinese imports as early as next week. Companies have until Sept. 6 to comment on the proposed duties, and Trump wants to impose the tariffs once that deadline passes.
Trade disputes, if they escalate between the world’s biggest economic superpowers, are seen as having the potential to disrupt the global economy and hurt demand for crude.
“The bottom line for oil is that, as long the Saudis don’t really open the spigots [on oil output], U.S. production doesn’t spike again, and the U.S. and China continue to move towards a resolution to the trade war (which would subsequently keep a lid on the dollar), then the 2018 oil rally can continue,” said Richey.
Market participants are also watching a potentially supply-impacting tropical storm in the Atlantic off the coast of Africa near Senegal.
Elsewhere in the energy complex, September gasoline RBU8, +0.38% rose 0.3% to $2.15 a gallon, trading up 3.3% from the month-ago finish, while September heating oil HOU8, -0.15% was little changed at $2.248 a gallon, set for a monthly rise of over 5%. The September contracts expire at Friday’s settlement.
At the U.S. retail level, AAA said this week that it expects prices for gasoline to drop to an average $2.70 a gallon this fall, in part due to expectations for a decline in consumer demand after Labor Day.
October natural gas NGV18, +1.53% added 1.5% to $2.918 per million British thermal units, with the contract up about 4.3% in August.
