London — Crude oil futures remained weaker in late morning European trading Friday as traders focus on the risk of escalation in the trade war between US and China amid the resumption of exports of light sweet crude from Libya, and despite a long-term outlook of tighter supply.

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At 1030 GMT, ICE September Brent crude futures were trading at $73.83/b, down 62 cents/b from Thursday’s settle, while NYMEX August WTI crude futures were 23 cents lower at $70.02/b.

« Prices are weaker because there is repricing of oil as a risky asset in reason of the trade escalation between the US and China and this pressure was reinforced by a physical market development when the Libyan ports re-opened earlier than planned, » said Harry Tchilinguirian, senior analyst at BNP Paribas.

« Crude has supportive price factors such as shrinking spare production capacity in countries like Saudi Arabia and Russia on the back of the upcoming loss of 1 million b/d of Iranian crude, but the weakness today is carrying on from Wednesday, in the broader market context, with notably the repricing of assets in equity, » he added.

Moreover, the trade war and its implications in term of fallout for emerging market economies makes the dollar more expensive, which put further pressure on crude prices and explained why the first three months of the Brent forward curve were now flirting with a contango structure, according to Tchilinguirian.

« Market sentiment has clearly shifted, » said Commerzbank commodities analysts in a daily note. « Price-supportive news such as the massive decrease in US crude oil stocks is currently falling on deaf ears. Even the International Energy Agency’s warning in its monthly report that spare production capacities could be pushed to their limits provoked no noticeable price response yesterday, » they also wrote, adding that just a week ago, such a remark would probably have sparked a pronounced price rise.

Meanwhile, European equity markets were rebounding Friday, with the UK’s FTSE 100 rising 0.48%, Germany’s DAX also up 0.21%, and France’s CAC 40 gaining 0.35% at 1030GMT Thursday.

–Virginie Malicier, virginie.malicier@spglobal.com

–Edited by Maurice Geller, maurice.geller@spglobal.com


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