Oil prices dip but set for solid weekly gains

Oil took a breather on Friday after three days of solid gains, but was set for its strongest week since early July, boosted by a decline in the United States (US) inventories and a looming hurricane in Florida, while new signs of trade talks emerged.

Brent crude was down 7 cents, or 0.1 per cent, at $61.01, by 0236 GMT after adding 1 per cent on Thursday. Brent is heading for a gain of nearly 3 per cent this week.

US oil fell 11 cents, or 0.2 per cent, to $56.60 a barrel. The contract is set for a gain of more than 4 per cent this week.

“The frothy price action emphasises the store that energy markets place on trade progress to support further gains in prices going forward,” said Jeffrey Halley, senior market analyst at OANDA.

“What is given, can be taken away though, and the rally looks more like it's running on vapours than petrol,” he said.

Worries about a slowdown in economic growth due to the US-China trade war and the flow-on to oil demand kept a lid on price gains, even as falling inventories indicate a balancing market.

However, the US and China gave signs on Thursday that they will resume trade talks as the two economic superpowers discussed the next round of in-person negotiations in September ahead of a looming deadline for additional US tariffs.

The approach of Hurricane Dorian toward Florida raised fears that offshore US crude producers may slow output if the storm passes into the Gulf of Mexico over the weekend.

Dorian is heading toward landfall on the Atlantic coast of Florida over the weekend and may enter into the eastern Gulf of Mexico next week. It is is forecast to strengthen and become a highly dangerous Category 4 hurricane on Sunday, the National Hurricane Centre said.

Chevron Corp's 356,440 barrel-per-day Pascagoula, Mississippi, refinery is closely monitoring the progress of Hurricane Dorian, a company spokesman said on Thursday.

Last month, Hurricane Barry prompted offshore oil companies to shut as much as 74 per cent of production, lifting US crude prices, before it weakened to a tropical storm.

Government data on Wednesday showed US crude stocks dropped last week by 10 million barrels to their lowest since October as imports slowed, while gasoline and distillate stocks each fell by over 2 million barrels.

Inventories at the nation's main delivery hub in Cushing, Oklahoma, where WTI futures are priced, slumped last week by nearly 2 million barrels to their lowest since December, the data showed.

Cushing stocks have dropped by over 300,000 barrels since the government report, traders said, citing market intelligence firm Genscape's midweek report.

COMMENT NOW