Oil steadies below previous session close on trade fears

By Jessica Resnick-Ault

NEW YORK (Reuters) - Brent oil futures steadied under $74 a barrel on Friday, holding onto gains from the previous session as trade concerns provided a headwind to a further rally.

U.S. West Texas Intermediate (WTI) crude futures were down 27 cents at $68.69 a barrel by 10:45 a.m. EDT (1445 GMT). Brent crude futures were at $73.42 per barrel, down 3 cents from their last close.

"There is a strong demand backdrop here for WTI particularly," said John Kilduff, a partner at Again Capital Management in New York. Crude stockpiles at the Cushing, Oklahoma storage hub are at a nearly 4-year low, and are expected to fall further in the coming week. "That is helping to support the market despite some decent headwinds from trade."

Low stocks were still providing a floor as overall U.S. crude inventories are below the 5-year average of around 420 million barrels.

Concerns about demand from China also increased Friday as state oil major Sinopec cut its purchases of U.S. crude. China's Unipec, the trading arm of state oil major Sinopec, has suspended crude oil imports from the United States due to a growing trade spat between Washington and Beijing, three sources familiar with the situation said on Friday.

China has said it plans to impose tariffs on liquefied natural gas, raising concerns that it could also impose tariffs on oil, Kilduff said.

"Chinese demand from the independent refiners is also lower while the escalating trade war also doesn't help sentiment," said Warren Patterson, commodities strategist at ING.

U.S. nonfarm payrolls rose in July but the U.S. trade deficit recorded its biggest increase in more than 1-1/2 years in June as the boost to exports from soybean shipments faded and higher oil prices lifted the import bill.

The Commerce Department said on Friday the trade gap surged 7.3 percent to $46.3 billion.

Elsewhere, Russian oil output rose by 150,000 barrels per day (bpd) in July from a month earlier, to 11.21 million bpd, energy ministry data showed on Thursday.

Output by top exporter Saudi Arabia has also risen recently, to around 11 million bpd, and U.S. production is around that level as well.

Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production to help to compensate for an anticipated shortfall in Iranian crude supplies once planned U.S. sanctions take effect later this year.

But a complete halt to Iranian supplies looks unlikely with Bloomberg reporting on Friday that China, Iran's biggest customer, has rejected a U.S. request to cut imports from the OPEC member.

(Reporting by Jessica Resnick-Ault in New York and Julia Payne in London, Editing by Andrea Ricci)