Oil prices dipped on Friday amid escalating trade disputes between the United States and other major economies, although crude markets remain tight due to supply disruptions, high demand, and the looming US sanctions against Iran.
US West Texas Intermediate (WTI) crude futures CLc1 were at $73.18 a barrel at 0708 GMT, down 26 cents, or 0.4 percent, from their last settlement. WTI on Thursday hit its highest since November 2014 at $74.03 per barrel.
Brent crude futures LCOc1 were at $77.69 per barrel, down 16 cents, or 0.2 percent.
Friday’s falls came amid an escalation of trade disputes between the United States on one side and major economies including China, India and the European Union on the other.
Traders worry that escalating tariffs on export goods, including US crude oil, will stall trading and eventually choke world economic growth.
Commodities brokerage Marex Spectron said this week that the macroeconomic outlook was “overwhelmingly bearish.”
Despite this gloomy outlook, oil is in tight supply.
North America’s oil markets have tightened as an outage at Canada’s Syncrude has locked in over 300,000 barrels per day (bpd) of production. The outage is expected to last at least through July, according to operator Suncor Energy.
Outside North America, record demand and voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) have pushed up prices.
Unplanned supply disruptions from Libya to Venezuela further tightened the market.
OPEC and Russia have said they will raise output to meet demand and replace crude from unplanned disruptions.
“The clear message from the OPEC+ meetings was that those countries with spare capacity would increase production to keep the market well-supplied,” US Jefferies bank said on Friday.
It added that “an incremental 1 million bpd from this group is feasible in July” and that this would offset the expected drop in Iranian exports and other declines elsewhere during the second-half of the year.
The US government is trying to shut Iran out of oil markets when it fully implements its sanctions in November.
“The Trump administration looks poised to carry on with a maximum pressure campaign on Tehran,” brokerage Phillip Futures said.
Many major buyers of Iranian oil, including Japan, India and South Korea, have already indicated that they would stop importing Iranian crude unless they get an exemption on the sanctions by Washington.
Until then, however, Asia seems to be shipping in as much Iranian oil as possible, with government and ship-tracking data showing on Friday that imports of Iranian crude oil by major buyers in Asia rose in May to the highest in eight months.
China, India, Japan and South Korea last month imported 1.8 million bpd from Iran, up 15 percent from a year ago, the data showed.