Oil mixed as Saudi output rises; equities rebound

NEW YORK — Oil was mixed on Friday as a Canadian supply outage supported US crude prices, while an increase in production from the Organization of the Petroleum Exporting Countries’ (OPEC) biggest exporter Saudi Arabia pushed Brent lower.

US crude futures gained 86 cents, or 1.2%, to settle at $73.80 a barrel. Global benchmark Brent slipped 28 cents to settle at $77.11 a barrel.

For the week, West Texas Intermediate ( WTI) futures lost about 0.50% after hitting a 3-1/2-year high on Tuesday, while Brent lost 3%.

US crude was bullish after official data on Thursday showed inventories at Cushing, the delivery point for US crude futures, fell to their lowest in three-anda-half years. That came after an outage at a major Canadian oil sands facility cut regional supply. The outage at the 360,000 barrels per day ( bpd) Syncrude facility in Canada has contributed to a sharp reduction in the discount for US crude versus Brent crude over the past month.

The discount has halved to $ 5.54 a barrel on Friday from $11.57 in early June.

“We’re continuing to see — and I expect the trend will continue — lower inventories in Cushing in July, resulting in a very tight light sweet crude market,” said Andrew Lipow, president of Lipow Associates.

“That has been exacerbated by the Canadian Syncrude outage… which has resulted in a scramble for supplies in the Midwest. I do expect that at least over the next few weeks, the Brent-WTI spread is going to narrow.”

Brent was pressured by expectations of higher Saudi and Russia production, which impacts Europe and Asia, where Brent is the benchmark, more than markets dominated by US crude prices.

Saudi Arabia told OPEC that it increased production by almost 500,000 bpd last month. OPEC and its allies agreed earlier this month to a modest increase in output to dampen the oil price rally, which hit a 3-1/2-year high.

The supply increase reversed some of the cuts that OPEC and other major producers put in place in early 2017 to end several years of supply glut.

Saudi Arabia also said it would reduce the official selling price of its August barrels.

US markets also garnered support from a government employment report showing betterthanexpected growth in jobs. That blunted the impact of an escalating US-China trade war.

“We’re seeing a bounce to the upside thanks to spillover from a really good jobs number and strength in equity markets, as well as a draw in Cushing stocks,” said Jim Ritterbusch, president of Ritterbusch and Associates.

The trade war has yet to have a direct impact on oil markets, but China has indicated it could place tariffs on US crude imports.

If that happens, “Chinese demand would then shift to other suppliers,” Commerzbank said in a note.

“Because the oil market is already in tight supply due to the numerous outages, this would drive international prices (Brent) further up.” —