Oil prices fell on Thursday as Iran signaled it may support a small rise in OPEC crude output, possibly paving the way for the producer cartel to agree a supply increase during a meeting on Friday.
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Markets were also pushed lower by an escalating trade disputes between the United States and other major economies, including China, the European Union and India.
Brent crude futures were at $74.24 per barrel at 0637 GMT, down 50 cents, or 0.7 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $65.42 a barrel, down 29 cents, or 0.4 percent.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), signaled on Wednesday it could agree on a small increase in the group’s output during a meeting to be held at OPEC’s headquarters in Vienna on June 22 together with non-OPEC member and top producer Russia.
“There appears to be an air of confidence that this deal will move through,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA.
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Tehran had previously resisted pressure by OPEC’s de-facto leader Saudi Arabia to raise output.
Still, analysts do not expect a harmonious OPEC meeting.
“Our expectations are for a tense, discordant and highly geopolitical OPEC+ meeting,” said Japan’s Mitsubishi UFJ Financial Group.
OPEC, together with other key producers including Russia, started withholding output in 2017 to prop up prices, but a tightening market has led to calls by consumers for more supplies.
ESCALATING TRADE DISPUTE
Looming over markets is the escalating trade spat between the United States and China, in which both sides have threatened punitive tariffs on each other’s exports, including U.S. crude oil.
China on Thursday canceled a trip to West Virginia by executives from China Energy Investment Corp to discuss a planned $83.7 billion investment in the state and called Washington’s behavior “capricious.”
In another escalation, India on Thursday joined China and the EU by increasing duties on various commodities imported from the United States.
Price were preventing from dropping further by strong U.S. fuel demand, as seen in record refinery runs and travel data and a large decline in crude inventories.
U.S. refineries processed a seasonal record of 17.7 million bpd of crude oil last week, according to data from the Energy Information Administration (EIA) said on Wednesday.
This comes as a record 46.9 million Americans are expected to travel during the upcoming July 4 holiday, according to the American Automobile Association on Thursday, which is seen as a leading indicator for U.S. fuel demand.
Amid healthy consumption, commercial U.S. crude inventories dropped by 5.9 million barrels in the week to June 15, to 426.53 million barrels, the EIA said.
U.S. crude oil production was flat week-on-week, remaining at a record 10.9 million bpd.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Joseph Radford)
