London — Crude oil futures ticked up marginally in the European morning session Monday but the market lacked direction, analysts said, with market participants focusing on demand-side issues amid an unraveling Turkish lira and the trade war between the US and China.
At 1018 GMT, ICE October Brent crude futures rose 27 cents/b from Friday's settle to $72.10/b, while the NYMEX September light sweet crude contract was flat at $65.91/b.
ICE Brent futures were still down sharply week on week due to the tumbling Turkish currency, a slowdown in economic growth and the ongoing US- China trade disagreements, analysts at PVM said Monday.
"Another week, another dose of heartache for oil bulls," the analysts said. "Brent dropped for a third week on the trot after losing 1.4% while WTI declined for the seventh consecutive week with a drop of 2.6%."
The dip in global currencies had halted the rally in oil markets and was expected to lead to a drop in demand from emerging economies, analysts at Commerzbank said in a note Monday.
"The pronounced depreciation of currencies in particular may put the brakes on demand," the Commerzbank note said. "Since the start of the year, the oil price has surged by 14% in Chinese yuan, by 19% in Indian rupees and by a whopping 75% in Turkish lira. By contrast, the increase in US dollar terms has been "only" 7%."
China, a major oil demand centre, has been a key focus for oil markets as the economy softened and a series of public spats with the US dampened imports. Shipments from both Saudi Arabia and the US to China have slowed and the market is wary of growing Saudi stocks.
However, Saudi Arabia is under pressure to attract more buying interest and is lining up to be the main supplier to replace Iran after the implementation of US sanctions in November, PVM said.
"Of particular interest was the fact that [Saudi Arabia] cut the price of its flagship Arab Light crude for the prized Asian region for a second consecutive month," the PVM note said.
Nonetheless the impending sanctions on Iran by the US are likely to cap any further slides due to the expected supply restrictions, Commerzbank said.
Meanwhile Baker Hughes data released Friday indicated the US oil rig count remained flat at 869 for the week ended August 17, following a 10-rig jump the previous week, as operators faced challenges providing production growth while keeping capital spending in check.
The latest report by Baker Hughes showed the rig count was still the highest it has been since early March 2015, when the count dropped in reaction to oil prices falling to half of mid-2014 levels.
The market awaits data from the Joint Organisations Data Initiative later Monday to give an indication of oil June export volumes from OPEC countries.
