Oil set for weekly drop as stock markets, U.S. inventories weigh

By Ahmad Ghaddar

LONDON (Reuters) - Oil prices were set to post their first weekly fall in three weeks on Friday after news of U.S. plans to impose tariffs on steel and aluminium hit global equity markets and as U.S. crude inventories climbed.

President Donald Trump said he would impose hefty tariffs to protect U.S. producers, risking retaliation from major trade partners such as China, Europe and Canada.

Brent crude fell by 32 cents to $63.51 a barrel by 1313 GMT, while U.S. crude was down 30 cents at $60.69. Both contracts are set for weekly declines.

Adding to pressure, U.S. crude stocks rose faster than expected last week, increasing by 3 million barrels compared with predictions for a gain of 2.1 million barrels.

"We are being driven by the pickup 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.

Despite the rise in total U.S. crude stocks, inventories at Cushing in Oklahoma. Inventories there fell by 1.2 million barrels, marking 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 meets for 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 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.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)