Oil supported as new hedges placed, but higher supplies weigh

Oil Ticks Up to End a Volatile Week

The oil market is set to tighten further before the end of this year - a sign that OPEC's early response to boost supply may not be enough to offset a significant (possibly 1 million bpd barrel) loss of crude oil supply from Iran, Helima Croft, RBC Capital Markets global head of commodity strategy, told CNBC on Friday.

In the previous week, total US inventories rose 3.8 million barrels, while supplies at Cushing fell 1.3 million barrels. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.3% at $69.16 a barrel.

Overall U.S. crude oil inventories actually rose by 3.8 million barrels last week to 408.74 million barrels C-STK-T-EIA , the EIA data showed.

Stocks at the key Cushing storage hub in Oklahoma fell by 1.3 million barrels, the lowest level since October 2014, according to data from the Energy Information Administration (EIA). USA crude ended the week down 0.4 percent, while Brent has fallen 1.5 percent in the week so far.

On Monday, August 6, the first set of USA sanctions on Iran will snap back, so we will be probably looking at tougher actions over August and September, Croft said.

Price differentials for the medium-sour Mars grade to Dubai quotes on arrival in North Asia have fallen to 50 cents to $1 a barrel, down from indications of $1-$1.50 at the start of July, partly as China avoided US crude due to potential import tariffs. Iranian officials have warned the country would not easily yield to a renewed USA campaign to strangle Iran's vital oil exports.

Official data from Russian Federation on Thursday showed that the country's oil output rose by 150,000 barrels per day (bpd) in July from June to 11.21 million bpd.

"Oil is holding up reasonably well".

USA officials told Reuters on Wednesday that they believe Iran is preparing to carry out a major exercise in the Gulf, apparently moving up the timing due to heightened tensions.

The price jump earlier this summer had come about in large part because of President Donald Trump 's decision to pull the USA out of an worldwide agreement to curb Iran's nuclear program.

The United States, China and India have previously urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth.

“There are a lot of escalation points that could occur very quickly and that worries me, ” Barratt said.

Trump has turned up pressure on China for trade concessions by proposing a higher 25% tariff on $200 billion of Chinese imports and China has said it will retaliate. However, low stocks were still providing a floor as even with last week's rise, overall USA crude inventories are below the five-year average of about 420-million barrels.

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