Oil lower on renewed trade-war fears

Oil futures traded lower Friday, on track for a third straight weekly decline, on renewed trade-war fears after President Donald Trump said he was ready to impose tariffs on all $505 billion worth of Chinese imports.

West Texas Intermediate crude for September delivery CLU8, +0.16% the U.S. benchmark, fell 31 cents, or 0.5%, to $67.93 a barrel. The global benchmark, September Brent crude LCOU8, +0.39% was flat at $72.58 a barrel, on the ICE Europe exchange.

In an interview with CNBC, Trump said he was prepared to impose tariffs on all Chinese goods imported into the U.S. Trade-war concerns have periodically weighed on oil prices on fears that a hit to global growth would undercut demand.

WTI rose Thursday, buoyed after a Saudi Arabian official said the kingdom’s crude exports would fall next month in an effort to avoid oversupplying the market. Brent, however, lost ground as a strike by oil workers in Norway concluded.

Based on most-active contracts, WTI is on track for a 3.9% weekly fall, while Brent is on track for a 3.6% decline, according to FactSet.

Oil bulls shouldn’t necessarily fret, said Michael Tran, commodity analyst at RBC Capital Markets, in a note.

“As far as retracements go, the recent sell off in the oil market is as healthy as they come, particularly since the market has otherwise been on a one-way train higher over the past 12 months,” he said, in a note. “Not only has the selloff been broad commodity based, but much of the recent weakness can be attributed to fairly orderly length liquidation or crystallization of profits rather than a plethora of fresh shorts slamming the market.”

WTI is up nearly 46% over the last 12 months, while Brent is up around 47%.

The fundamental backdrop remains constructive,Tran said, but traders are weary of market-moving political risks “stemming from a tweet, [Strategic Petroleum Reserve] release or trade-war escalation.”

“While we anticipate further upside through the balance of the year and into next, we continue to encourage market watchers to keep an eye out for temporary pockets of physical weakness, particularly in the Atlantic Basin as front Brent spreads flirt with contango,” he said. Contango is a situation when the futures price trades above the expected future spot price.

Traders on Friday will be looking ahead to the release of weekly oil rig data from oil-field services firm Baker Hughes.

In other energy trading, August gasoline futures RBQ8, +0.97% rose 1.41 cents, or 0.7%, to $2.0576 a gallon, while August heating oil HOQ8, +0.58% was up 0.63 cent, or 0.3%, to $2.0964 a gallon.

August natural-gas futures NGQ18, +0.04% shed 0.2 cent, or 0.1%, to $2.767 per million British thermal units.

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