Oil prices fall but set for big weekly gain on US-China trade dispute

Markets are also downbeat following the International Energy Agency's latest revision to oil demand growth. AP

Oil gave back some of its recent gains on Friday, but was still headed for the biggest weekly increase since early July, boosted by a decline in US stocks, a looming hurricane headed to Florida and an easing of US-China trade rhetoric.

International benchmark Brent crude was down by 0.4 per cent, at $60.85 a barrel, but was heading for a gain of more than 2 per cent for the week. Brent crude is a major trading classification of oil that serves as a benchmark price for purchases of oil globally.

Whereas, US West Texas Intermediate (WTI) crude futures fell 0.7 per cent to $56.31 a barrel. However, it is still set for a gain of nearly 4 per cent this week. WTI is a grade of crude oil used as a benchmark in oil pricing.

“Oil prices remain elevated and we are in the middle of trading range here for both Brent and West Texas,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Worries about a slowdown in economic growth and the impact on oil demand due to the trade war between the world's two biggest oil consumers kept a lid on price gains this week, even as falling inventories indicate a balancing market.

On Thursday, the US and China gave signs that they will resume trade talks, discussing the next round of in-person negotiations in September ahead of a looming deadline for additional US tariffs.

"It is very difficult to predict the sudden twist and turns in the Sino-US trade backdrop," said Samuel Siew, investment analyst at Phillip Futures in Singapore.

The approach of Hurricane Dorian towards Florida earlier raised fears that offshore US crude producers may shutter 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 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 Mississippi oil 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.

But the US Energy Information Administration data also showed that US production rebounded to a weekly record of 12.5 million barrels per day, suggesting there is still plenty of supply available.