Oil rises toward $69, but set for 2019's biggest weekly loss
Oil rose toward $69 a barrel on Friday after two sessions of losses, but remained on track for its biggest weekly drop this year due to rising inventories and concerns of an economic slowdown.
U.S. crude inventories rose to hit the highest since July 2017, suggesting ample supplies in the world's top consumer. Meanwhile, worries that the U.S.-China trade is developing into a more entrenched dispute have also hit prices.
"Clearly, bargain hunters are back in town," Naeem Aslam, chief market analyst at TF Global Markets, said of the bounce. "However, it is still set to record the worst week of the year and this is due to the increase in trade war tensions between the U.S. and China."
Brent crude, the global benchmark, rose 85 cents to $68.61 a barrel at 0857 GMT. It was still set for a decline of more than 5% this week. U.S. West Texas Intermediate crude added 75 cents at $58.66.
Some analysts expect gains to be short-lived. "Without a resolution to the ongoing trade dispute quickly, which now looks very unlikely, oil could struggle to push higher," Jasper Lawler, Head of Research at futures brokerage London Capital Group, said.
Even so, supply cuts - both voluntary and those resulting from U.S. sanctions, kept a floor under prices. The Organization of the Petroleum Exporting Countries and allies including Russia, an alliance known as OPEC+, have been cutting supply since January to tighten the market and prop up prices.
U.S. sanctions on the oil industries of Iran and Venezuela, both OPEC members, have curbed their crude exports, reducing supplies further than the OPEC+ deal aimed to. Brent's price structure remains in backwardation, in which prices for prompt delivery are higher than those for later dispatch, suggesting a tight balance between supply and demand.
UBS kept a forecast for Brent to again reach $75 - the year's high - this month, citing tighter supplies. "Compliance of OPEC and its allies to the production cut deal remains high, while production from Iran and Venezuela is likely to again trend lower this month," analyst Giovanni Staunovo wrote in a report.
Meanwhile, India has already officially ended all oil imports from Iran, India's Ambassador Harsh Vardhan Shringla said on Wednesday, after Prime Minister Narendra Modi has managed to emerge victorious from India's elections, according to the Daily Mail.
Shringla was reluctant to say whether India agreed with the United States' stance on the sanctions, but did say that the sanctions have hurt India, who relies on Iran in particular for a sizeable chunk of its crude oil. It now has had to find new sources of crude oil after the United States refused to extend the waiver India was enjoying up until May 2.
Reports came in suggesting that India had asked the United States for another sanction waiver so it could keep importing Iranian oil in the amount of 300,000 barrels per day, but the United States declined to extend any of the waivers.
While India is now in full compliance with the US sanctions on Iran, with the elections behind it, India may once again revisit the possibility of resuming oil purchases from Iran. India has already stated that it will review its decision to stop purchasing Iranian oil after its elections are in the review mirror.