Oil Falls for Third Straight Week as Trade Talks Limp From D.C.
(Bloomberg) -- Oil fell for the third straight week as investors weighed the potential damage to global growth after an inconclusive end to the latest U.S.-China trade talks.
Futures in New York were little-changed for the day but finished the week off by 0.5 percent. The world’s two biggest economies wrapped up high-level talks in Washington without a deal, but they avoided a complete breakdown in negotiations despite U.S. President Donald Trump’s decision to raise tariffs on $200 billion in Chinese exports.
With Trump saying he saw no need to rush a deal, investors face “a number of questions in terms of the economic outlook and therefore in terms of oil and demand,’’ Harry Tchilinguirian, head commodity markets strategist at BNP Paribas in London, said by telephone. ‘‘As you have an escalation of tension, you also have an element of uncertainty which leads to people taking off risks.’’
Despite a week of trade brinksmanship, signs of tighter global supplies have kept prices from an all-out collapse. Tensions continued to rise this week between the U.S. and Iran, with Washington dispatching an aircraft carrier group to the Middle East, and the U.S. threatened more sanctions against fellow OPEC member Venezuela amid political strife there.
In Norway, Equinor ASA said its Oseberg Field Center has been shut since Wednesday afternoon, affecting fields with about 6 percent of the nation’s output.
July Brent crude jumped to a $1-a-barrel premium to the August contract on Friday -- a situation known as backwardation -- suggesting supply fears remain a dominant force.
West Texas Intermediate crude for June delivery fell 4 cents to $61.66 a barrel on the New York Mercantile Exchange at the close of trading. Brent for July settlement rose 23 cents, or 0.3 percent, to $70.62 a barrel on the London-based ICE Futures Europe exchange.
Also on the supply side, contaminated Russian shipments and leaks in a key Nigerian pipeline have amplified the restrictions on Iran and Venezuela’s exports. It remains uncertain to what extent Saudi Arabia will increase its production to fill the gap. Brent’s three-month oil time-spread is reflecting the shortages, with the widest backwardation in almost five years.
“Prices are finding fundamental support from the tightening supply, as also indicated by the pronounced state of backwardation in the Brent forward curve,” Commerzbank AG analysts including Carsten Fritsch wrote in a report.
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