Production of crude oil is expected to stay at record highs for the time being despite pipeline constraints in the Permian-the top performer in the US oil patch.
Oil prices extended losses in post-settlement trade, with USA crude at $68.32 a barrel, after data from the American Petroleum Institute showed domestic crude inventories rose 5.6 million barrels last week.
An estimated 4.8 million barrels a day of crude oil and refined products flowed through the Bab al-Mandeb strait in 2016 toward Europe, the US and Asia, according to the US Energy Information Administration.
Although trade tensions between the USA and China pushed oil lower for much of this month, Barclays Plc warned of " significant upside risk" for prices in the fourth quarter as sanctions begin to bite Iranian exports.
Oil prices fell about 2 percent on Wednesday as a surprise increase in USA crude stockpiles fed concerns about global oversupply, while investors anxious that trade tensions could hit energy demand. A Reuters poll had forecast a fall of 2.8 million barrels.
A volley of sabre-rattling tweets had raised tensions in oil markets, which are already concerned about supplies as United States sanctions coming back into force in November aim to choke off Iranian oil exports.
My expectation for the West Texas Intermediate oil price for August is the same as it was for July, namely WTI will range between $65 and $75 per barrel. September WTI fell 92 cents, or 1.32%, to settle at $$68.69 a barrel, for a weekly gain of 0.6%.
Saudi Arabia, meanwhile, temporarily halted shipments via a key Red Sea shipping lane after it said two tankers were attacked by Yemen's Houthi militia.
On June 22-23, OPEC, Russia and other non-members agreed to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 per cent.
OPEC production rose in June, led by Saudi Arabia, and reached a 2018 high in July, a Reuters survey found on Monday, although declines from Iran, facing USA sanctions, and other producers limited the increase. The trade dispute between the nations - home to the world's two biggest economies - has weighed on oil markets because it threatens to slow global growth and cool demand for crude.
Investors were cheered by a Bloomberg News report that senior USA and Chinese officials are seeking to restart negotiations to end an escalating trade war.