Oil prices were higher on Friday, supported by expectations that sanctions on Iran would tighten supplies, but crude futures still dropped for a third straight week as a slump in stock markets and concerns about trade wars clouded the fuel demand outlook.
Brent crude oil fell $1.12 or 1.5% to a low of $75.77 per barrel and was trading around $76.24, down 65 cents, by 1130 GMT.
U.S. West Texas Intermediate (WTI) crude futures were at $66.44 a barrel, 38 cents, or 0.6 percent, below their last settlement.
Crude oil futures were volatile Friday in part as investors are concerned about risks of an economic slowdown, yet the move into normal backwardation reflects healthier price levels, analysts said. The shift by Beijing, Iran's top customer, gives the US a building block in an economic barrier around Iran as it prepares to renew sanctions on the country's energy sector in early November.
According to the outlook, Brent crude oil spot prices, which averaged 70 USA dollars per barrel in September, are expected to average 81 dollars per barrel in the fourth quarter of 2018 and will fall to an average of 75 dollars per barrel in 2019. Just recently, Chinaʹs top refiner Sinopec halved its oil imports from Iran as of September, seen by some as bowing to pressure from the United States, which is now seeking to reduce Iranian oil exports down to zero.
China is Iran's biggest oil customer. Global trade is also slowing down, with freight rates decreasing after an extensive period of growth.
At long term with sufficient oil supply by major oil exporter Iran's role in world oil market may decrease, Iran needs to keep its share in regional and world oil market. "GDP and oil demand are pretty well-correlated", said Stewart Glickman, an energy equity analyst at CFRA Research.
Saudi Arabia Energy Minister Khalid Al-Falih further added that there could be a need for intervention to reduce oil stockpiles after increases in recent months.
Saudi Arabia's OPEC governor said on Thursday the oil market could face oversupply in the fourth quarter. Output this year is forecast to break the annual record in 1970. However, the effects of the USA withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in May, the resumption of Iran sanctions and the potential response from other countries posed significant uncertainty to the forecast.