Oil prices fell on Friday, headed for a weekly loss, as concerns over slowing demand in top importer China and trade conflicts with the U.S. weighed on sentiment.
Crude prices under pressure despite inventory declines
Despite some gains on Thursday due to shrinking U.S. inventories and optimism over tighter markets, crude prices were still on track for a weekly decline following disappointing Chinese economic data earlier this week.
Brent oil futures for September delivery shed 0.5 percent to $84.73 per barrel, while West Texas Intermediate (WTI) crude futures fell 0.6 percent to $80.79 per barrel as of 00:26 ET (04:26 GMT). Both contracts were down between 0.2 percent and 0.6 percent so far this week.
Persistent concerns over Chinese demand
Worries over sluggish demand in the world’s biggest oil consumer remained a key focus, following weaker-than-expected growth figures for the second quarter. This came after data last week showed a decline in China’s oil imports in June.
Stimulus hopes and U.S.-China trade tensions
The gloomy economic readings coincided with the Third Plenum of the Chinese Communist Party, which failed to yield any clear signals about additional stimulus measures.
Sentiment toward China was further dampened by reports that the U.S. was planning stricter trade restrictions on the country’s technology sector, which could invite retaliatory actions from Beijing. Speculation around a potential Donald Trump presidency also contributed to souring sentiment, given his protectionist policy stance.
Adding to the bearish backdrop, Trump indicated that he would push for increased U.S. oil production, which could lead to higher supply in the coming years.
Read more: Oil prices rise amid declining U.S. crude inventories, Fed rate cut expectations
Some support from tighter markets and rate cut hopes
However, expectations of tighter oil markets in the near term provided some support to crude prices. U.S. inventories shrank for a third consecutive week as travel and fuel demand picked up during the summer months.
The prospect of interest rate cuts by the Federal Reserve also buoyed crude, as such a scenario would present better conditions for economic growth and oil demand.
Geopolitical tensions add risk premium
Geopolitical tensions between Hamas and Israel, as well as aggression in the Red Sea, also kept some risk premium priced into oil markets outside the U.S.
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