Crude oil weighed by Saudi output hike, trade tensions
Gold steady
LONDON, July 7, (RTRS): Oil slipped below $77 a barrel on Friday, under pressure as higher Saudi production and trade tensions between the United States and China offset support from oil supply disruptions.
Top exporter Saudi Arabia told OPEC it had raised oil output by almost 500,000 barrels per day last month, OPEC sources said, a sign Riyadh wants to make up for shortages elsewhere and dampen prices.
Brent crude, the global benchmark, was down 83 cents at $76.56 a barrel by 1403 GMT. US crude slipped 43 cents to $72.51.
“On the bearish side both Saudi Arabia and Russia are living up to their promise to increase output,” said Tamas Varga of oil broker PVM. “Looming US sanctions on Iran, however, are causing serious concerns amongst market players.”
US tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the two world’s biggest economies on a path towards a full-blown trade conflict.
“The US-China trade dispute is set to intensify as neither side is prepared to back down,” said Abhishek Kumar, senior energy analyst at Interfax Energy.
A US government report also weighed on prices this week, showing crude stockpiles rose by 1.3 million barrels, while analysts had forecast a decline.
Nonetheless, the potential trade war between the United States and China comes amid a tight oil market.
Oil output cuts by the Organization of Petroleum Exporting Countries and allies including Russia since January 2017 have reduced a glut of crude.
Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although OPEC has now started to ease those curbs with Saudi Arabia pumping more.
Even so, renewed US sanctions on Iran against its oil exports look set to tighten supply further.
South Korea, a major buyer of Iranian oil, will not lift any Iranian crude and condensate in July for the first time since August 2012, three sources familiar with the matter said on Friday.
Gold steadied on Friday as traders weighed a weaker dollar versus steadier equities, though the precious metal was on course for slight gains for the week as the dollar rally looks to be losing steam amid escalating US-Sino trade tensions.
The dollar fell after data showed the US economy created more jobs
than expected in June, but a closely-watched inflation gauge -- wage growth -- rose less than forecast, while the unemployment rate increased.
A weak dollar tends to lift gold because it makes the greenbackpriced metal cheaper for non-US investors.
US tariffs on $34 billion worth of Chinese goods took effect on Friday, while China’s commerce ministry said it had been forced to retaliate, meaning $34 billion worth of imported
US goods also face 25 percent tariffs.
The imposition of the tariffs was absorbed calmly by markets, with stocks edging higher. Rising stock markets, seen as risky assets, tend to weigh on gold, seen as a safe haven asset in times of economic or political upheaval.
“It’s mainly the dollar that’s supporting gold this week, the dollar has stopped going up,” said Fawad Razaqzada, an analyst at FOREX.com. He added, however: “Global stocks are not exactly slumping, (possibly) because this (trade war has been) priced in.”
Spot gold was 0.1 percent lower at $1,256.15 an ounce at 1329 GMT, having dropped to $1,252.15 earlier in the session.
It was, however, headed for its first weekly gain in four.
US gold futures for August delivery slipped 0.1 percent to $1,257.10 an ounce.
Meanwhile, US central bankers discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong, minutes of the Federal Reserve’s last policy meeting on June 12-13 released on Thursday showed.
“Traders are extremely cautious when it comes to gold. The intraday price-action has a bullish set-up and shows that the price has potential to test the level of $1,280 in the coming days if the dollar weakness continues,” ThinkMarkets chief market analyst Naeem Aslam said.
India’s gold imports fell for a sixth month in June to 44 tonnes as a drop in the rupee to record lows lifted local prices to a near 21-month high, curtailing demand, provisional industry data showed.
Gold-backed exchange-traded funds (ETFs) saw outflows in North America and Asia, but saw inflows in Europe during June as a strong US dollar depressed gold prices, the World Gold Council said.
Silver edged up 0.1 percent at $16 an ounce.
Palladium slipped 0.4 percent to $944 an ounce, while platinum fell 0.6 percent to $836.50.