More Gains For Oil As Traders Shift Gears, Worry About Supply Flows

Meanwhile, Trump wants to come down "very strong" on China and India: File Image/Pixabay

The flip-flopping concerns of oil traders on Friday led to more gains for the commodity but also ensured that prices would remain range-bound, as fears of oversupply that dominated the market of late suddenly shifted to supply risk.

Following Ukraine's drone attack that suspended operations at the oil-loading port of Primorsk in the Leningrad region and targeted three pumping stations, Brent settled up 62 cents at $66.99, and West Texas Intermediate settled up 32 cents at $62.69.

Joe DeLaura and Florence Schmit, energy strategists at Rabobank, said, "We expect that Ukraine will step up their attacks on Russian energy infrastructure as a ceasefire is still unlikely, and support prices through destruction of oil supply."

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, added, "Today's narrative has shifted toward sanctions and supply risk rather than oversupply…for now, we continue to go nowhere fast."

Geopolitical tensions were further stoked on Friday by Washington calling on Group of Seven and European Union allies to impose "meaningful tariffs" on goods from China and India, in an attempt to end their purchases of Russian oil.

U.S. president Donald Trump told media, "We're going to have to come down very, very strong."

Meanwhile, the UK government on Friday introduced 100 new sanctions designed to reduce Russia's revenue sources, following Russian drone incursions in Poland.

Yet, Friday also saw a strong continuation of the bearish sentiment that has heavily influenced oil trading these past weeks: Daan Struyven, head of oil market research at Goldman Sachs, told media that lower oil prices on top of a desire to bolster energy security will cause China to add 500,000 barrels per day (bpd) of crude inventories over the next five quarters.

But despite this buying spree and apparent crude stockpiling, the bank still expects oil prices to fall to the low $50s next year, due to an estimated 1.8 million bpd oversupply.

For its part, the ever-dour International Energy Agency earlier warned that global supply was expected to grow by 2.7 million bpd this year, eclipsing its projected demand growth of just 740,000 bpd; the EIA predicted that this could push inventory builds to an "untenable" 2.5 million bpd later in the year.