Oil prices are headed for further losses this week as a hurricane threatening the east coast of Florida and the roll-out of US tariffs against China on Sunday could hurt demand.
Brent lost 1 per cent to close at $60.43 per barrel on Friday, despite a significant pick-up last week as a higher draw of US crude inventories and the softening tone of the US-China trade war lifted sentiment. Hurricane Dorian, headed to hit the US on Saturday, is expected to hurt prices further, according to analysts.
West Texas Intermediate, the benchmark tracking largely North American crude grades, fell 2.8 per cent to finish the week at $55.1 per barrel. The sharp drop-off follows a largely positive week for the benchmark, which reached a two-week high of $56.71 per barrel on Thursday after the inventory data was released.
US stocks declined by 11.1 million barrels per day, higher than the 2 million barrel draw forecast by the American Petroleum Institute.
Hurricane Dorian been classified an "extremely dangerous" of category four, according to the National Hurricane Centre. Although Florida is not an oil-producing state and there is no expected impact on output from the Gulf of Mexico, analysts said the storm will affect demand, driving prices down. Should it reach the Gulf of Mexico, prices could be affected further as the region accounts for around 16 per cent of US crude output and 45 per cent of the country's refining capacity, according to the US Energy Information Administration.
A tranche of the latest US tariffs on China will come into effect on September 1, which could pressure demand further with the market experiencing a sharp plunge in demand growth this year.
However, there are hopes the two countries will meet to discuss tariffs in September, particularly given Beijing's willingness not to retaliate to the latest measures imposed by the US.
Commerce Ministry spokesman Gao Feng said last week that China had little appetite for retaliation to the US's move to increase existing tariffs by 5 per cent.
"China has ample means for retaliation but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war," he said.
Prices could revive next month with Opec+, the alliance led by Saudi Arabia and Russia, scheduled for a technical committee meeting on September 12. The producers who have been looking to draw inventories built up by surplus US supply have a pact until March 2020 to cut their collective production by 1.2 million bpd.
