Oil traded unchanged and slightly below $69 today, capping losses as buoyant equities and the dollar's fall against the euro helped to offset concerns about an inventory build ahead of the US autumn season.
While analysts expect the market to be cautious until details emerge of how regulations on position limits would be imposed, they expect only indirect impact from fears about any US-China trade dispute, with a bigger role for equities and the dollar.
"Equities are doing somewhat better in Asia today, continuing the trend from the United States," said Victor Shum, a Singapore-based analyst at Purvin and Gertz. "The primary factors for the market are strong equities and a weaker dollar against the euro."
NYMEX crude for October delivery was down 1 cents at $68.85 a barrel by 0311 GMT, after settling down 43 cents yesterday, while ICE Brent was down 4 cents at $67.40.
Oil has more than doubled from this year's low of $32.70 struck on January 20th, but is still 53 per cent below its record high of more than $147 hit in July 2008. The market this year has failed to move above the $75-level struck on August 25th.
The CME Group Inc, which runs NYMEX, sent an advisory on Friday to traders and brokers warning of tighter enforcement of existing position limits on NYMEX, CME, and other exchanges from September 14th.
"The devil is in the details of the regulations," Mr Shum added. "And until we know the details, the market will be a bit cautious but not unduly worried."
While the euro climbed to stay in sight of its 2009 highs, supported by growing talk that Asian central banks were bidding the single currency and moving away from the U.S. dollar, Japan's Nikkei stock average squeezed out gains of 0.1 per cent, buoyed by Toyota Motor and other exporters.
China's key stock index opened up 0.08 per cent today, as traders added that the impact of the US decision to impose special duties on Chinese tyre exports would be limited.
"The impact of that trade war is only on equities. And since oil is following equities, you could argue that the impact is somewhat indirect," Mr Shum said.
Oil prices would struggle to rise above $75 in the short term because of plentiful product stocks as the U.S. autumn season approached, he said.
"There is an overhang of distillates and fundamentals remain weak. These factors will combine to keep a lid on oil prices."
A preliminary Reuters poll ahead of weekly petroleum inventory reports showed forecasts for a 2.7-million-barrel drawdown in domestic crude stocks, a 1.5-million-barrel increase in distillate supplies and an 800,000-barrel build in gasoline stocks.
Industry group the American Petroleum Institute (API) will release its inventory data later today, while the US Energy Information Administration, a government agency, will issue its own report tomorrow.
Reuters