Oil prices recorded a weekly loss again after two-week gains. The price of the West Texas Intermediate (WTI) for October delivery and Brent for November delivery decreased by 2.9 percent and 1.0 percent, respectively, in the week ending Sept. 7.
The U.S. oil market was closed on Monday due to Labor Day holiday. On Wednesday, oil prices moved downward as there were reports that the United States might allow India a waiver from U.S. sanction targeting Iran.
The market saw that as a bearish factor as major oil suppliers have increased their outputs and the market might become oversupplied because the U.S. sanction against Iran would not halt as much Iranian oil exports as expected.
Anna Mikulska, a non-resident fellow at the Center for Energy Studies, Rice University's Baker Institute for Public Policy based in Houston, told Xinhua that "cutting out a large supplier like Iran while other major suppliers like Venezuela are struggling, means that oil prices are poised to rise.
According to Mikulska, Iran sanctions "are even more problematic for countries and companies that had begun to increasingly rely on Iran's oil, including many European customers as well as large importers like China and India."
She said, "To this point, China has been open about defying the U.S. sanctions and India may follow its lead. Europe seems to be the one that, despite strong rhetoric from the EU, may be the one that complies the most."
On Wednesday, WTI for October delivery decreased by 1.02 percent and settled at 68.72 dollars a barrel on the New York Mercantile Exchange, while Brent crude for November delivery decreased by 0.80 percent and settled at 77.27 dollars per barrel on ICE Futures Europe.
The U.S. Energy Information Administration (EIA) weekly petroleum status report for the week ending Aug. 31 was released a day later this week as the markets were closed on Monday.
On Thursday, EIA reported a draw of 4.3 million barrels in commercial crude oil inventories, but the market was expecting a draw of 1.9 million barrels.
U.S. imports of crude oil for the week increased by 229,000 barrels per day from the previous week's levels to 7.71 million barrels per day. Its exports decreased by 271,000 barrels per day from the previous week's levels to 1.51 million barrels per day.
EIA also reported on Wednesday that U.S. oil production remained unchanged at 11 million barrels per day in the week. However, the pipeline bottlenecks are causing big price differential between Midland and WTI. Analysts see those pipeline bottlenecks as a big threat against production growth of the Permian Basin.
EIA reported a build of 3.12 million barrels in distillates inventories. The market was expecting a build of 500,000 barrels. It also reported a build of 1.85 million barrels in total gasoline inventories rather than the market's expectation of a draw of 1.5 million barrels.
Even though EIA reported a large draw in the crude oil inventories, the market focused on large builds in gasoline and distillates inventories. The builds in the inventories of oil products caused concerns over demand.
Moreover, the concerns over trade disputes between the United States and China intensified the bearish sentiment in the oil market.
Following the EIA's weekly petroleum status report, WTI and Brent contracts prices moved downward and settled 1.27 percent and 0.53 percent lower, respectively, on Thursday.
On Friday, Baker Hughes reported that the number of active drilling oil and gas rigs in the United States remained unchanged at 1048.
Meanwhile, the U.S. Dollar Index maintained its level around 95, down from 97 levels in a couple of weeks. The index is a measure of the value of the U.S. dollar relative to a basket of foreign currencies. Oil is mostly traded in dollars all over the world and a stronger dollar pressures the oil demand.
On Friday, two major benchmarks moved different directions. WTI decreased by 0.19 percent and Brent increased by 0.33 percent. The price differential between WTI and Brent contracts widened further during the week.
Analysts pointed out the widening gap between WTI and Brent can support U.S. oil exports in the future. The higher differentials between the two major benchmarks are, the more arbitrage opportunities for traders to pursue. As a result, more U.S. crude oil would be shipped to Asian market.
The market is closely watching the issue of trade disputes between the United States and China. The outlook over the trade talks between the two major economies would have impact on oil market.
The markets will also keep a close look at how the inventories levels will come out next week as the analysts expected lower crude oil inputs to refineries in the upcoming weeks.
Furthermore, three tropical cyclones are forecast to affect U.S. states or territories in the coming week. It will be watched very closely if any of them will disrupt the oil production and refining activities along the coastline.
Editor:Cherie
