Oil slips as United States crude stockpiles show surprise build

Global outages overshadow underwhelming OPEC output hike
Saudi Arabia, Russia Agree to Continued Oil Market Coordinations

08 July, 2018

President Donald Trump criticised Opec on Twitter again for failing to lower prices for consumers.

President Trump wrote in the tweet that the "Opec Monopoly must remember that gas prices are up & they are doing little to help", and that America defends many Opec members for "very little" money.

U.S. West Texas Intermediate (WTI) crude futures were down 37 cents, or 0.5 percent, at $73.77 per barrel.

Trump has lashed out at OPEC producers to reduce prices, making a claim - later backtracked by the White House - in a tweet on Saturday that Saudi Arabia had agreed to increase oil output by up to 2 million barrels.

Crude-oil prices retreated early Friday and were on track to book a weekly loss for the first time in three weeks, a day after the US benchmark contract suffered its lowest settlement in more than a week amid signs of rising production in Saudi Arabia and protracted trade tensions between the United States and China, according to monitored reports.

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Opec, together with a group of non-Opec producers led by Russian Federation, reduced output in 2017 to prop up the market. "Looming U.S. sanctions on Iran, however, are causing serious concerns amongst market players".

Saudi Arabia had political reasons to respond positively to Trump's request, given its animosity to arch-rival Iran, which Trump is trying to bring to its knees through strict new sanctions. Last month, members of OPEC agreed to pump an additional 1 million barrels of crude daily, a move that should help contain prices.

USA tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond in kind.

OPEC and Russian Federation said in June they were willing to raise output to address concerns of supply shortages due to unplanned disruptions from Venezuela to Libya, and likely also to replace a potential fall in Iranian supplies due to USA sanctions.

According to analysts, escalating tensions between China and the US, with the two largest economies in the world implementing tariffs $34 billion on their respective imports and the threat of more action, could weigh on crude prices and soften demand expectations. "Because the oil market is already in tight supply due to the numerous outages, this would drive worldwide prices (Brent) further up", Commerzbank said in a note.

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