Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil prices were down on Friday as the market refocused on bearish longer term factors following a bounce in the previous session as US crude inventories in a key hub fell to their lowest in nearly four years.

US West Texas Intermediate (WTI) crude futures were at $68.70 a barrel at 8.47am GMT, down 26c from their last settlement. Brent crude futures were at $73.15 a barrel, down 30c from their last close.

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). This helped push Brent futures to close $1 a barrel higher on Thursday.

Overall US crude oil inventories actually rose by 3.8-million barrels last week to 408.74-million barrels, the EIA data showed.

"Trade volume is pretty low in futures today. Yesterday you had a strong rebound supported by Cushing but there’s not a lot else that is driving prices higher so we are seeing a bit of a correction," Olivier Jakob at PetroMatrix consultancy said. However, low stocks were still providing a floor as even with last week’s rise, overall US crude inventories are below the five-year average of about 420-million barrels.

Bearish factors

WTI is heading for a roughly flat week after four weekly falls, while Brent is on track to post a fourth week of declines in five, set for a drop of 1.4%. Analysts said the outlook beyond the short-term was turning bearish.

"Bulls are fighting a losing battle … Brent oil may fall to $67 a barrel," said Reuters technical commodities analyst Wang Tao.

Russian oil output rose by 150,000 barrels per day (bpd) in July from a month earlier, to 11.21-million bpd, energy ministry data showed on Thursday. Output by top exporter Saudi Arabia has also risen recently, to about 11-million bpd, and US production is around that level as well.

Saudi Arabia, Russia, Kuwait and the United Arab Emirates (UAE) have increased production to help compensate for an anticipated shortfall in Iranian crude supplies when planned US sanctions take effect later this year. But a complete halt to Iranian supplies looks unlikely with Bloomberg reporting on Friday that China, Iran’s biggest customer, has rejected a US request to cut imports from the oil cartel Opec member.

China’s International United Petroleum and Chemicals (Unipec) has also suspended purchases of US crude amid the growing trade row, sources said. Jakob from PetroMatrix commented, "Unipec saying they won’t buy US crude and China saying they won’t comply with Iran sanctions are bearish."