Oil prices gain as US drillers cut oil rigs

NEW YORK: Oil prices edged up on Friday as a weakening dollar and lower expected August oil exports from Saudi Arabia supported the market, offsetting concerns about US-China trade tensions and supply increases.

Despite the day's advance, prices remained on course for a third consecutive weekly decline as gains in supply had dragged on prices during the week.

Brent crude was up 34 cents at $72.92 a barrel by 1:23 p.m. EDT (1723 GMT). Brent was on track to fall 3.2 percent in the week.

The expiring US West Texas Intermediate (WTI) crude for August delivery was up 79 cents at $70.25 a barrel, while the more liquid September contract rose 10 cents to $68.34 a barrel. US crude is set to end the week down 1 percent.

US drillers this week cut oil rigs by the most since March, with the rate of growth slowing over the past month with recent declines in crude prices.

Drillers cut 5 oil rigs for a total of 858 rigs in the week to July 20, according to a weekly report from Baker Hughes <RIG-OL-USA-BHI>.

A weakening US dollar, following US President Donald Trump's criticism of the Federal Reserve's policy moves, has helped relieve some pressure on oil prices, said Phil Flynn, analyst at Price Futures Group in Chicago.

"The dollar was a one-way ticket for the last couple of weeks and basically reversed directions, giving us some strong support," Flynn said.

Prices also received a boost after OPEC's largest oil producer, Saudi Arabia, said it would temper its exports next month.

Trade tensions continued to weigh on the market, providing a ceiling for any gains, traders said. Trump said in a CNBC interview he was ready to slap tariffs on all $500 billion of imported goods from China.

Lower oil demand in the United States and China caused by an economic slowdown due to the trade spat between the two countries would likely weigh heavily on markets, some analysts said.

"The impact on world economic growth of a levy of this magnitude will be severe and will likely have a strong negative impact on markets," said Olaf van den Heuvel, chief investment officer at Aegon Asset Management.

The People's Bank of China on Friday reduced its midpoint for the yuan for the seventh straight trading day to the lowest in a year.

The yuan then retreated to a near 13-month low, although it rebounded later.

Signs of Russia and Saudi Arabia increasing oil production, as well as last week's surprise build in US crude stocks, have also weighed on prices, said Tariq Zahir, analyst at Tyche Capital Advisors.

"You're having supply come back on to the markets, so it's not surprising to see a little bit of weakness," Zahir said.