LONDON - Oil prices were set on Friday to post their first weekly decline in three weeks following a sell-off in global stock markets after news of planned U.S. tariffs on steel and aluminium raised fears of a trade war.
President Donald Trump announced he would impose hefty tariffs on the two metals to protect U.S. producers, risking retaliation from major trade partners such as China, Europe and neighbouring Canada.
Brent crude rose marginally to $63.85 a barrel by 1125 GMT, while U.S. crude was down 4 cents at $60.95. Both contracts are set for weekly declines.
"The rise in total U.S. commercial stocks coupled with a new high in domestic crude production made for a soft backdrop," Stephen Brennock, analyst at London brokerage PVM Oil Associates, said in a note.
U.S. crude stocks rose last week even as refineries hiked output, increasing by 3 million barrels, compared with expectations for a gain of 2.1 million barrels.
Still, stocks fell again at Cushing in Oklahoma, with inventories down by 1.2 million barrels in a 10th consecutive week of decline, the Energy Information Administration said this week.
"Although destocking in Cushing has continued, with stocks there falling below 30 million barrels for the first time since late 2014, the overall increase in U.S. oil stocks has overshadowed the good news," Fawad Razaqzada, market analyst at Forex.com, said in a note.
The Organization of the Petroleum Exporting Countries will hold a dinner on Monday in Houston with U.S. shale firms, the latest sign of the producer group widening talks about how best to tame a global oil glut.
U.S. crude output slipped in the last month of 2017, but in November hit an all-time high of 10.057 million barrels per day. Weekly data showed another record and further gains are expected.
"The market is not showing any obvious signs of turning around the mood. We are being driven by the pick-up in U.S. inventories and in general terms the market went a bit too far too soon," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"Then we have the volatility in the U.S. dollar and the implications of the tariff news to factor in," he said.