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Crude oil prices edged lower on Friday amid hesitant trading

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Crude oil prices edged lower on Friday ahead of the planned meeting between US President Donald Trump and Chinese leader Xi Jinping at the G20 Summit and the OPEC meeting at the beginning of the next week.

The futures on US crude oil WTI depreciated by 0.49% to 59.14 USD per barrel, while the Brent variety declined by 0.68% to 66.10 USD per barrel.

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The G20 leaders meet on Friday and Saturday in Osaka, Japan, but the most anticipated meeting is between Donald Trump and Xi Jinping on Saturday.

The trade conflict between the two largest economies in the world keeps the oil prices under pressure, exacerbating fears that the slowdown in economic growth may affect the demand for “black gold”.

Donald Trump said on Wednesday that a trade deal with Chinese President Xi Jinping is possible this weekend.

“Even if the negotiations between the US and China pass on a positive basis, we feel that OPEC will extend the current constraints by the end of the year. However, the imposition of larger restrictions seems unlikely given the increasing supply problems”, commented ANZ Bank.

The Organization of Petroleum Exporting Countries (OPEC) and some non-cartel countries, including Russia, will hold a meeting on July 1-2 in Vienna to decide whether to continue with supply constraints. The OPEC+ agreed to cut supplies by 1.2 million barrels per day from January 1, and the deal expires on June 30.

Russian President Vladimir Putin said in an interview with the Financial Times that cutting OPEC+ quota deal has helped stabilize oil markets and that the future of the deal is expected to be on the agenda of the G20 summit.

Tensions between the US and Iran also have an effect on oil trade.

US oil inventories and exports

The federal government’s EIA report revealed that crude inventories plunged by 12.8 million barrels for the week ending Jun 21, the most in nearly three years and more than 4.5 times what energy analysts had expected. Sharply lower imports and jump in exports led to the massive stockpile draw with the world’s biggest oil consumer.

Crude exports averaged a record 3.77 million barrels per day last week, up 348,000 barrels per day from the previous week. Meanwhile, net imports fell 811,000 barrels per day.

The past week’s big decline in oil inventories comes as a relief for industry watchers who saw supplies trend mostly higher since mid-March. In fact, prior to this decrease, stockpiles expanded in 9 of the last 13 weeks and were up nearly 43 million barrels (or 10%) during the period.

Adding to the positive sentiment, the latest report also shows that stocks at the Cushing terminal in Oklahoma came down from their highest since December 2017. Inventories at the key delivery hub for US crude futures traded on the New York Mercantile Exchange was down 1.7 million barrels to 51.8 million barrels.

But at 469.6 million barrels, current crude supplies are still 12.7% above the year-ago figure and 5% over the five-year average. The crude supply cover was down from 28.4 days in the previous week to 27.4 days. In the year-ago period, the supply cover was 23.7 days.

Meanwhile, the gasoline supplies fell 996,000 barrels for its second successive weekly decline. The drop – slightly below the polled number of 1.1 million barrels – came on account of lower imports of the fuel, which edged down 21,000 barrels per day. At 232.2 million barrels, the stock of the most widely used petroleum product is now 3.7% below the year-earlier level and at the five-year average range.

Distillate fuel supplies (including diesel and heating oil) fell 2.4 million barrels last week, while analysts were looking for an inventory drop of around 1.1 million barrels. Current supplies – at 125.4 million barrels – are 6.8% higher than the year-ago level though stocks remain 7% below than the five-year average.

US oil rig count

The US oil and gas rig count rose by 11 week-on-week to 1,051, according to the data of S&P Global Platts Analytics, as the rig count continued a familiar seesaw pattern that has gradually brought it down by nearly 200 rigs since late 2018.

The oil-directed rigs rose by five to 837 for the week ended June 26, while natural gas rigs were up by four to 208. A rise of two rigs was posted for categories not specified for oil or gas.

This week’s 1,051 total represents a decline of nearly 100 rigs since the start of this year and a fall of 182 since the recent peak of 1,233 in mid-November 2018, a time when the price of WTI was dropping from October highs in the mid-$70s/b.

The tendency of the rig count since then has been to seesaw up and down while gradually dropping more rigs over time.