Oil Futures Mixed on Friday

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were mixed with West Texas Intermediate and Brent little changed while products gained in early trading Friday, bouncing back from one-month low settlements earlier this week, as markets assess a 25% increase in U.S. tariffs on Chinese imports that took effect a minute after midnight.

Near 9 a.m. EDT, Nymex June WTI futures were fractionally higher at $61.75 per barrel (bbl) and ICE July Brent up $0.30 near $70.71 bbl, fading from overnight highs spurred by short-covering. Nymex June RBOB futures were up 1.75 cents near $1.9925 gallon, and June ULSD futures gained 1 cent to $2.0535 gallon.

Oil futures turned higher overnight as U.S. President Donald Trump slapped tariffs on $200 billion in Chinese imports despite quiet progress in U.S.-China trade negotiations. Beijing immediately vowed to retaliate, through no specific details of tariff increases have been made public yet. The White House said it would start the "paperwork" on Friday for 25% duties on a further $325 billion of Chinese imports, as trade talks set to resume today in Washington, D.C.

After United States carried out its threat to raise tariffs, U.S. equities turned lower with Dow Jones Industrial Average falling 150 points in futures trading Friday morning, pointing to a lower trading session. Against the backdrop, Asian stocks rallied on Friday, with Shanghai composite gaining 3.1% and Shenzhen closed Friday trade with a 3.8% advance.

Oil futures were also supported by expectations of tighter global crude market, as oil demand is projected to outpace supply, according to the most recent monthly outlook from Energy Information Administration. Government agency revised world oil production for this year down 410,000 barrels per day (bpd) from April's projection to 101.11 million bpd, driven mostly by production declines from Organization of the Exporting Petroleum Countries, while global demand is projected to rise by 1.4 million bpd this year.

Given the expected delayed response of global crude oil production to current oil market fundamentals, EIA now expects average net global oil inventory withdrawals of about 400,000 bpd during the second and third quarters.

U.S. commercial crude inventories registered a sizable drop last week, easing from 19-months high, while domestic production declined by 100,000 bod from a record 12.3 million bpd, although still nearly 14% higher from a year ago. U.S. gasoline stockpiles dipped by a smaller-than-expected 600,000 bbl in the profiled week, while implied gasoline demand remained robust, soaring to a better-than eight-month high.

Liubov Georges can be reached at liubov.georges@dtn.com