Oil. Picture: REUTERS
Oil. Picture: REUTERS

Tokyo — Oil prices edged lower on Friday and were set for a second weekly fall, as the market shrugged off a warning that spare capacity may be stretched as Opec and Russia increase production.

Brent crude eased 36 cents, or 0.5%, to $74.09 by 3.26am GMT. On Thursday it gained $1.05 a barrel, rebounding from a session low of $72.67. It is heading for a weekly fall of nearly 4%. US crude dipped 4c to $70.29, after a 5c decline in the previous session. It is heading for a weekly decline of nearly 5%.

It has been a wild week for oil prices with both the main benchmarks suffering heavy losses on Wednesday as traders focused on the return of Libyan oil to the market amid concerns about a China-US trade war.

However, a warning on spare capacity by the International Energy Agency (IEA) pushed Brent higher on Thursday, helping it recoup some losses.

"It is a tough market," said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo. "I think it is supported by relatively strong demand and inventories are falling, but if you look a little bit ahead US shale oil just continues to grow and then it depends on what goes on with Opec."

The oil cartel and other key producers including Russia have responded to the recent market tightness by easing a supply-cut agreement.

The energy agency cautioned that the world’s oil supply cushion "might be stretched to the limit" due to production losses in several different countries.

"Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit," the agency said in its monthly report.

"This vulnerability currently underpins oil prices and seems likely to continue doing so," the agency said.

China’s crude oil imports fell for a second consecutive month in June as shrinking margins and volatile oil prices led some independent refiners, known as "teapots", to scale back purchases, official data showed on Friday.

Reuters

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