Oil prices were mixed on Friday as Brent crude dipped on rising global tensions and increased Saudi production and US crude rose on short-covering.  BP photo.

Oil prices on track for weekly loss

Oil prices were mixed in trading on Friday as short-covering pushed up US crude futures, but US and China trade tensions along with rising Saudi production cut Brent’s value.

By 2:26 p.m., EDT, US West Texas Intermediate futures rose 50 cents to $73.44/barrel and Brent crude fell 37 cents to $77.02/barrel. The Canadian Crude Index slipped 16 cents to $46.07.

According to Reuters, for the week, WTI is on track for a drop of 0.4 per cent while Brent fell about 3 per cent.

“We have a little bit of a rally that’s materialized” for WTI, Bob Yawger of director of energy futures at Mizuho told Reuters.

The rally appears to be a “short covering situation – we were down almost 2 per cent yesterday,” said Yawger.

Jim Ritterbusch, president of Ritterbusch and Associates said in a note that Brent was “still having difficulty gaining independent bullish traction”.

“Increased Saudi crude availability that is being enhanced by reduced OSPs (official selling prices) into Europe and other regions is providing a strong counter against curtailed Libyan export activities,” Ritterbusch wrote.

The Saudis dropped the price of their August barrels and the kingdom told OPEC that it boosted its production by almost 500,000 barrels per day last month.

Production shortages in Venezuela, Angola and Libya have increased OPEC’s supply cut reductions, even though Saudi Arabia recently agreed to increase its output.

“The more that Saudi Arabia adds to the market, the less of a supply cushion we have – that’s a bullish twist to a bearish development,” said Yawger.

As well, uncertainty in global trade flows due to the escalating trade dispute between the US and China is also having an effect on oil prices.

On Friday, the Trump administration put tariffs on $34 billion in Chinese goods.  Beijing has since vowed to respond in kind and has indicated it could put a 25 per cent tariff on US crude.

Should that happen, “Chinese demand would then shift to other suppliers. Because the oil market is already in tight supply due to the numerous outages, this would drive international prices (Brent) further up,” Commerzbank said in a note.

And the Trump administration’s decision to re-impose sanctions against Iranian oil will further tighten global supplies. In May, Iran produced 4.455 million b/d.  The Middle Eastern country is OPEC’s second largest producer.

South Korea says it will go along with Trump’s demand to stop buying oil from Iran.  Seoul has opted to not lift any Iranian crude and condensate this month for the first time since August 2012, according to Reuters’ sources.

Baker Hughes released its weekly oil rig count.  Data from the company showed the US oil rig count rose by five to 863, up 100 over this time last year.  In Canada, the number of oil rigs is up by nine to 126, up by seven compared to last year.