After a rocky week of trading, oil prices steadied on Tuesday as the market turned its focus to dropping US crude stockpiles and the ongoing decline of Venezuela’s oil industry.  Anadarko photo.

Oil prices lost almost 10 per cent in last week

Oil prices steadied on Tuesday after losing almost 10 per cent in the previous week.  The market has shifted its focus from rising OPEC production to falling crude stockpiles in the United States as well as the continued break down of the Venezuelan oil industry.

By 3:01 p.m., EDT, benchmark Brent crude rose 18 cents to $72.02/barrel.  On Monday, Brent crude fell 4.6 per cent and hit lows not seen since April 17.  US West Texas Intermediate was down 2 cents to $68.04, slipping from a session high of $68.39/barrel.

The Canadian Crude Index rose 29 cents to $40.32.

In Venezuela, two of the country’s four crude upgraders are expected to undergo scheduled maintenance in the coming weeks.  According to Reuters, the units can process a combined 700,000 barrels per day (b/d), and are used to prepare heavy crude for export.

“Every time there’s an update that the situation in Venezuela is, in fact, worsening, it props up the market,” John Kilduff, a partner at Again Capital Management told Reuters.

Declining crude inventories in the United States are concerning traders as well.  A preliminary poll by Reuters predicts that US crude stocks will fall by 3.5 million barrels in the week ending July 13.

On Tuesday afternoon, the American Petroleum Institute will release its oil inventory data and on Wednesday morning, the US Energy Information Administration will report its US crude inventory data.

Tariq Zahir, managing member at Tyche Capital, told Reuters that the market is looking for clear signals on supply.

Over the weekend, the United States hinted that it may release crude from its Strategic Petroleum Reserve.  As well, will Libya’s crude production increase after military clashes in June and July shut down the country’s oil ports.

“You really have to see how much Saudi is going to produce, along with Russia,” Zahir said.

At a press conference following the Helsinki Summit, Russian President Vladimir Putin said Russia and the United States could work together to manage the global supply of oil.  Following Putin’s comments, oil prices fell, but analysts are hesitant to link the comments to the drop in prices.

Over the past week, oil prices have dropped by nearly 10 per cent.  Re-opened Libyan oil terminals and rising exports from OPEC producers and Russia have increased, driving down the price of crude.

US shale production at seven major US shale formations is set to rise by 143,000 b/d to a record high 7.47 million b/d in August, according to the US Energy Information Administration.  Output from all seven formations is expected to increase.

Intercontinental Exchange (ICE) says it will launch a contract for WTI crude which is deliverable in Houston.  Current WTI contracts have a delivery point in Cushing, Oklahoma.  This new contract will facilitate crude purchases for foreign buyers who then export the crude.

According to Reuters, the new contract highlights the rising volumes of oil available from the Permian Basin which are available for export.

The mounting trade war between the US and China continues to stall oil prices as analysts fear global economies could be impacted by the dispute, which would drop oil demand.

Beijing says it is confident it will hit its economic growth target of about 6.5 per cent in 2018, however, the trade dispute with the US could make attaining the increase difficult.

In the short term, Goldman Sachs is calling for continued oil price volatility and predicts Brent will sell between $70-$80/barrel.

“Supply shifts, alongside the ongoing surge in Saudi production, create the risk that the oil market moves into surplus” in the third quarter, the US investment bank said.