By Barani Krishnan
Investing.com - Iran and oil's war worries have to wait. Attention is back to China and the trade war.
Crude futures rowed back much of Friday's early gains that would have made it a four-day winning streak for the bulls as China’s state-run media expressed impatience over the trade negotiations after Huawei and other Chinese companies were shown the door from the U.S. market.
West Texas Intermediate futures, the benchmark for U.S. crude, settled down 11 cents, or 0.2%, at $62.75 per barrel. It hit a two-week high of $63.64 earlier on fears that a new war might break out in the Persian Gulf after Saudi Arabia accused Iran of sabotaging the kingdom's oil infrastructure.
Iran, officially barred from selling its crude under U.S. sanctions, had previously warned other oil exporters of "consequences" for supporting the action by President Donald Trump. But it denies charges of trying to sabotage Saudi oil facilities through its Houthi rebel allies, who have claimed responsibility for the attacks.
London Brent futures, the global benchmark for oil, slid by 48 cents, or 0.7%, to $72.14 per barrel by 2:42 PM ET (18:42 GMT).
In spite of the pullback from Friday's highs, WTI still ended the week up 1.8%. While it is down 2% on the month, year-to-date it shows a 38% gain.
Brent is up 2.2% on the week, 0.2% on the month and 34% on the year.
Oil turned direction after Taoran Notes, a pro-government WeChat blog run by China's state-owned Economic Daily, said it was "meaningless" for Chinese officials to meet with their American counterparts when Washington wasn't showing any sincerity for the welfare of Chinese commerce in striking a trade deal.
The comments, just one day after the White House excluded Huawei and other Chinese companies from the U.S. market, are a turn in rhetoric for China, which had previously been patient and hopeful on a deal being reached.
Market participants also became less bullish after media reports quoted senior Trump administration officials as saying the president actually had no wish to push the U.S. into a war with the Islamic Republic.
"I am not a believer in the 'Middle East Tension' story as I have been numbed in my years on this, and the addition of Trump into the picture only makes it seem worse," said Olivier Jakob at PetroMatrix, an oil consultancy in Zug, Switzerland.
"The chances of conflict to me are still very low, which tells me not to embrace this rally as it's too news-driven," Jakob said.
Oil prices did get some support from a drop in the U.S. oil rig count to 14-month lows.
In two previous weeks, the reading for oil rigs has moved back and forth by just two units. On Friday, industry firm Baker Hughes, which publishes the weekly number, said the count fell by 3 this week to 802, its lowest since March 16, 2018. U.S. crude production is near record highs at 12.2 million barrels per day.