Supply pressures add up to rally in crude oil prices

Oil Prices Gain on Falling U.S. Inventories

Oil prices dipped last Friday, with USA crude heading for a seventh weekly decline amid increasing concerns about slowing global economic growth that could hit demand for petroleum products as inventories build.

SP Global Platts says that "this leaves the door wide open for tariffs on two major us energy commodities exported to China in the next round - crude oil and LNG".

Energy consultancy FGE says it expects Iran's crude and condensate exports to drop below 1 million bpd by mid-2019. USA crude gained $1.73, or 2.6%, to $67.57 U.S.

Brent crude futures rose $1.48, or 2%, to $74.11 a barrel, by 2.57pm GMT.

The U.S. dollar index against a basket of six major currencies eased on Wednesday to 95.211 after losing 0.7 percent the previous day, weighed down by U.S. President Trump's comments on monetary policy.

Still, the incendiary media headlines that have stoked these fears don't exactly correlate to the economic declines the trade war is expected to cause: Moody's Investor Service said, "These [overall] measures are expected to shave up to 0.3-0.5 percentage points from China's real GDP growth in 2019; for the USA trade restrictions will trim off about one quarter of a percentage point from real GDP growth to 2.3 percent in 2019".

The shift shows how trade is being affected even before U.S. sanctions targeting Iran's crude exports snap back into effect in early November.

Brent crude oil futures LCOc1 were at $74.69 per barrel, down 9 cents from their last close. Instead, both countries activated another round of dueling tariffs on US$16 billion worth of each other's goods.

Washington is holding hearings this week on a proposed list of another US$200 billion worth of Chinese imports to face duties, to which China is nearly certain to respond.

The trade war is "expected to shave up to 0.3-0.5 percentage points from China's real GDP growth in 2019", said Moody's Investor Service, adding it should cut 0.25 percentage point from projected USA real GDP growth "to 2.3 percent in 2019".

American crude oil stockpiles are predicted to go down by 2 million barrels ahead of the Energy Information Administration's weekly report that is due to be published on Wednesday.

The prospect of a drop in oil exports from Iran, the third-largest producer in oil cartel Opec, in response to new USA sanctions was also supporting the market.

Meanwhile, a Chinese trade delegation is in Washington to discuss trade disputes with the United States side.

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