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Oil prices are falling slightly on Friday amid demand fears

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Oil prices are falling slightly on Friday amid demand fears over the US-China trade war. However, some support comes from expectations of greater restrictions on OPEC production.

The futures on US crude oil WTI fell by a minimum of 0.02% to 52.53 USD per barrel, while the Brent variety fell by 0.12% to 57.31 USD per barrel. Both varieties rose more than 2% on Thursday, recovering from their 6-month lows. The reason for yesterday’s optimism is the information that the world’s largest oil exporter Saudi Arabia has called on other producers to discuss the recent drop in crude oil prices.

Oil prices are still 20% below the highs reached in April, which puts them firmly in the bearish territory.

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Global financial markets have suffered in the last week after US President Donald Trump said his administration would impose a 10% duty on Chinese imports with an annual turnover of 300 billion USD from September 1. At the same time, the depreciation of the Chinese yuan has raised concerns about a currency war.

Earlier, the US Energy Information Administration lowered its oil demand outlook for 2019 to 1 million barrels per day. The forecast comes on top of an oil market that already fears a slowing demand for crude. The EIA cut its 2019 oil demand growth forecast by 70,000 barrels per day. Its 2020 forecast for global demand growth increased, however, by 30,000 barrels per day to 1.43 million barrels per day.

Oil price recovery can be short-lived, as the US-China trade dispute does not give real reasons for optimism.

In the meantime, it has become clear that Saudi Arabia plans to keep crude oil exports below 7 million barrels per day in August and September to help balance the market and reduce global oil reserves.

“The United Arab Emirates will also continue to support actions to balance the oil market”, said the country’s energy minister, Suhail Al Mazroui. He added that an OPEC meeting was expected to take place in Abu Dhabi on September 12 to review the oil market.

OPEC and its allies, including Russia, agreed in July to extend restrictions on oil production until March 2020 to support oil prices.

US oil inventories and production

The US crude oil inventories increased during the week ending August 2, according to the data of the US Energy Information Administration (EIA).

According to the Weekly Petroleum Status Report of the EIA, the US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 2.4 million barrels from the previous week. At 438.9 million barrels, US crude oil inventories were about 2% above the five-year average for this time of year.

According to the EIA, total motor gasoline inventories increased by 4.4 million barrels last week and were about 4% above the five-year average for this time of year. Finished gasoline and blending components inventories both increased last week.

Distillate fuel inventories increased by 1.5 million barrels last week and were about 1% below the five-year average for this time of year.

Propane/propylene inventories increased by 2.9 million barrels last week and were about 8 percent above the five-year average for this time of year. The total commercial petroleum inventories increased by 10.4 million barrels last week.

Crude oil imports averaged 7.1 million barrels per day last week with refineries operated at 96.4% of their operable capacity last week.

The gasoline production increased, averaging 10.4 million barrels per day, while the distillate fuel production rose to 5.3 million barrels per day.

Total products supplied over the last four-week period averaged 21.2 million barrels per day, up by 0.2% from the same period last year.

US oil rig count

The US oil rig count fell to a 19-month low this week as drilling activity waned in nearly all major basins. The number of active US oil drilling rigs edged down by 11 to 815 this week, the lowest since January 2018 and 100 lower than year-ago levels. The decline in oil drilling activity led the combined US oil and gas rig count down 11 to 1,022 last week, itself a 19-month low.

Rig count declines were seen in most major oil-focused basins. Active Permian and Williston basin rigs fell back one each to 437 and 57, respectively, while the SCOOP-STACK and Denver-Julesburg basin each shed two active rigs, bringing counts there to 76 and 30, respectively. In the West Texas Eagle Ford basin, the number of active oil rigs was unchanged on the week at 81.

The number of active drilling permits was sharply lower last week at 860, down 279 from the week prior and the lowest since early May.

The drilling slowdown comes amid a steep decline in oil prices in recent weeks.