Oil heads for fourth weekly drop
Brent for September settlement at $74.45 on the ICE Futures Europe exchange
Oil was poised for a fourth weekly decline as the unexpected halt in Saudi shipments through a Red Sea waterway failed to add a significant risk premium to prices, while concerns lingered over how the US-China trade spat will affect demand.
US futures headed for a 1.4 per cent decline last week. Trade concerns continue to cloud investor sentiment after the world’s top finance chiefs warned that escalating tensions threatened global growth. Meanwhile, Saudi Arabia temporarily halted oil shipments via the Bab Al Mandab Strait, a key shipping lane for crude at the southern tip of the Red Sea, after it said two tankers were attacked by Yemen’s Al Houthi militia.
Oil has lost about 6 per cent this month as a trade battle between the US and China shows no signs of letting up, raising fears it’ll curb demand growth. Investors are also watching political risk to supply after President Donald Trump warned of consequences if Iran threatens America.
Yesterday, prices were treading water, really not moving a lot, said Eugen Weinberg, head of commodities research at Commerzbank AG. That’s surprising given this temporary closure of the Strait on the Yemen coast. It’s probably because most of the geopolitical tensions are priced in.
West Texas Intermediate crude for September delivery was down 17 cents at $69.44 a barrel on the New York Mercantile Exchange at 8:02am in New York. Total volume traded was 61 per cent below the 100-day average.
Brent for September settlement was down 9 cents to $74.45 a barrel on the London-based ICE Futures Europe exchange, on course for a 1.9 per cent gain last week. The global benchmark was at a $5.01 premium to WTI.
Talks of the trade war dominated discussions during the Group of 20 nations summit last weekend as Trump prepares to slap tariffs on $500 billion of Chinese goods. Finance ministers and central bankers from the G-20 warned of risks including financial vulnerability as well as structurally weak growth, according to a statement published by the group after their two-day summit in Buenos Aires.
Even as the trade spat between the US and the European Union eased, the simmering tensions with China threaten to strain growth in Asia’s largest economy, which grew 6.7 per cent in the second quarter — the slowest expansion since 2016.
Prices rebounded somewhat in the latter part of the week after two Saudi vessels belonging to the Saudi National Shipping Co, each with a capacity of 2 million barrels of oil, were attacked by Yemen’s Al Houthis.