U.S. oil prices fall, but gain 9% for month with U.S.-China trade talks, OPEC meeting ahead

U.S. oil prices fall, but gain 9% for month with U.S.-China trade talks, OPEC meeting ahead

Natural-gas futures drop 6% in June

U.S. oil prices settled lower Friday, but gained more than 9% for the month of June, as traders awaited the outcome of Sino-U.S. trade talks in Japan Saturday and meetings early next week between key oil producers.

Traders are eager to hear of any progress in Sino-U.S. trade discussions at the Group of 20 meetings, which could help to support expectations for oil consumption by the two largest economies in the world.

Also in focus was next week’s gathering of the Organization of Petroleum Exporting Countries, which should include a production update and potential commentary on tensions between the U.S. and Iran, friction that is seen posing a risk to oil production and shipping.

“The duration of the U.S. and China trade war is the single most important factor” in the decision making process by OPEC and its allies, known as OPEC+, related to the production cut agreement, said Rob Thummel, portfolio manager at investment firm Tortoise. “Talks, signals, and even better— an agreement—between the U.S. and China at the G20 this weekend will dictate the OPEC+ decision.”

August West Texas Intermediate crude CLQ19, -0.46% lost 96 cents, or 1.6%, to settle at $58.47 a barrel. Prices on the New York Mercantile Exchange on Thursday settled at the highest for a front-month contract since May 22. Month to date, prices climbed 9.3%, according to Dow Jones Market Data.

International benchmark August Brent crude BRNQ19, -0.06% settled unchanged at $66.55, holding ground at a roughly one-month high. Prices on a front-month contract basis were up 3.2% for the month, according to Dow Jones Market Data. The August contract expired Friday and the new front-month contract, September Brent BRNU19, -0.29% fell 93 cents, or 1.4%, to finish at $64.74.

President Donald Trump and his Chinese counterpart Xi Jinping will use the G-20 meeting this weekend to “press pause” on their continuing trade war, analysts said, although uncertainty persists, especially around the treatment of technology security. The spat has put the health of global economic growth, and thus, energy demand, in question.

Meanwhile, OPEC and its allies will hold meetings on Monday and Tuesday, after the original date was moved from June 25-26.

The meetings come as tensions between the U.S. and Iran have grown after Iran shot down a U.S. surveillance drone over the Strait of Hormuz earlier this month.

OPEC, meanwhile, is poised to extend its oil production-cut agreement into the second half of this year, The Wall Street Journal reported Friday, citing the cartel and Saudi officials. Some OPEC members are expected to argue for bigger output curbs, but the Saudis are unlikely to back those proposals, the report said. The agreement, which began at the start of this year and expires June 30, called on the OPEC+ alliance to cut production by a collective 1.2 million barrels a day.

OPEC must consider the “increasing role of the U.S. as a global supplies of crude oil,” said Thummel, as U.S. oil production has been increasing despite an 11% year-to-date decline in the oil rig count.

On Friday, however, Baker Hughes BHGE, -0.24% reported that the number of active U.S. rigs drilling for oil rose by 4 to 793 this week. That followed a modest 1-rig increase a week earlier.

Rounding out energy trade, August natural gas US:NGN19 fell 1.6 cents, or 0.7%, to $2.308 per million British thermal units, with prices settling down about 6% for the month. The EIA reported Thursday that domestic supplies of natural gas rose slightly less than expected, by 98 billion cubic feet for the week ended June 21.

July gasoline RBN19, -1.08% shed 0.2% to $1.943 a gallon, with the contract up 7.8% for the month. July heating oil HON19, -0.71% shed 0.4% to $1.945 a gallon, for a monthly rise of 5.6%.The July contracts expired at the end of the session.

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