Oil markets muted as U.S.-China trade war remains unresolved

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Oil prices slipped on Thursday as an escalating trade dispute between the United States and China outweighed the bullish impact of a decline in USA commercial crude inventories.

The October contract added US$2.02 to settle at US$67.86 yesterday, the highest closing price for the front-month futures since Aug 7.

US West Texas Intermediate (WTI) crude futures were at US$68.08 per barrel, up 25 US cents, or 0.3 per cent.

The U.S. dollar index against a basket of six major currencies eased on Wednesday to 95.211 after losing 0.7 percent the previous day, weighed down by U.S. President Trump's comments on monetary policy.

By October, Nigerian oil supply is projected to hit a three-month high with a total of 38 cargoes, derived from daily loadings averaging 1.12 million barrels.

Brent crude oil futures were at US$74.93 per barrel at 0245 GMT, up 20 U.S. cents, or 0.3 per cent, from their last close.

"The market is trying to balance the worries about decreased global demand growth and how much extra oil the Saudis and Russians are going to put on", said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.

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The dollar fell after Federal Reserve Chair Jerome Powell said steady rate hikes are the best way to protect the US economic recovery.

Instead, both countries activated another round of tariffs on $16 billion worth of each other's goods.

Washington is holding hearings this week on a proposed list of another $200 billion worth of Chinese imports to face duties, to which China is nearly certain to respond. But even with upgrades to infrastructure, the full capacity of exports is limited on the Gulf Coast because most can't load the larger crude oil vessels, the EIA said.

The shift shows how trade is being affected even before U.S. sanctions targeting Iran's crude exports snap back into effect in early November.

USA crude inventories fell 5.8-million barrels last week, the Energy Information Administration (EIA) said, more than the 1.5-million-barrel draw forecast by analysts polled by Reuters.

Signs of slowing USA crude output growth and a weaker US dollar also provided some support to oil prices, said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

The dollar index served as a tailwind, said Bob Yawger, director of futures at Mizuho in NY.

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