By Adedapo Adesanya
Oil futures were mixed on Friday with support coming from European economic data but the gains were limited as tensions between the United States and China escalated further.
The international benchmark, Brent crude, dropped 5 cents or 0.12 per cent to sell at $43.27 per barrel while on the other hand, the US West Texas Intermediate (WTI) crude gained 18 cents or 0.44 per cent to settle at $41.25 per barrel.
China ordered the United States to close its consulate in the city of Chengdu on Friday, responding to a US demand earlier this week that China closes its Houston consulate, as relations between the world’s two largest economies worsen.
This renewed tensions between the world’s top two oil consumers stoked worries about oil demand, which already faces headwinds including rising coronavirus cases in the United States.
The possibility of this proved too much as it overpowered good news from Europe.
According to data, Euro zone business activity grew in July for the first time since the coronavirus pandemic hit in the second month of this year.
The economic data in Europe was much better than anticipated, which would suggest that demand destruction in recent months because of COVID-19.
In June, the region had already shown signs of a recovery with flash PMIs (Purchasing Managers’ Index) hitting 47.5, up from 31.9 in May. A reading below 50 indicates an economic contraction. However, the July number surpassed this threshold coming in at 54.8, indicating that economic activity grew for the first time since February.
Both crude futures also finished the week positively after hitting their highest settlements since early March.
However, the rising cases of coronavirus especially in the US continue to impact prices. Some states have reinstated restrictions to curb the latest outbreak, which is expected to decrease fuel consumption.
This is happening after the Energy Information Administration (EIA) said on Wednesday that crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels.
This increase in US inventories is coming at a time when the Organization of the Petroleum Exporting Countries and their allies, OPEC+ are set taper production cuts from 9.7 million barrels per day to 7.7 million barrels starting next month.
Analysts noted that oil prices could see a near-term correction if recovery in fuel demand slows further, especially in the United States.
