HOUSTON - Oil market has been closely watching the trade dispute between the United States and China, the extent of the potential sanctions on Iran and the supply status of Libya for the week ending July 13.

Especially, the market weighed concerns over resurgent Libyan supply. Oil prices fell sharply on Wednesday on news that Libya was suddenly set to restore hundreds of thousands of barrels per day.

The West Texas Intermediate (WTI) for August delivery fell 3.73 dollars on Wednesday, to 70.38 dollars a barrel on the New York Mercantile Exchange. The 5 percent drop was the steepest daily drop within the last year. Brent sank almost 7 percent on Wednesday.

Oil benchmarks went in the same direction this week. On Friday, the WTI for August delivery pared some of the weekly losses, rose 68 cents to 71.01 dollars on the New York Mercantile Exchange, while Brent crude for September delivery added 0.88 dollar to 75.33 dollars a barrel on the London ICE Futures Exchange as the traders were not totally convinced with the stability of the resurgent Libyan crude oil supply.

The WTI and Brent lost 3.8 percent and 2.3 percent, respectively, for the week.

However, the analysts also attributed the steep drop to a 'correction' as the global supply deficit concern eased and the trade dispute between the United States and China escalated.

In the previous week, the U.S. government quietly asked Saudi Arabia and some other Organization of the Petroleum Exporting Countries (OPEC) producers to increase oil production by about 1 million barrels a day, aiming at curbing oil prices hiking.

According to the Monthly Oil Market Report that was released by OPEC this week, Saudi Arabia's crude oil production rose 405 thousand barrels per day, to 10.42 million barrels per day.

As a leading producer of crude oil, the U.S. output plays important role in the global market. According to U.S. Energy Information Administration (EIA), the U.S. crude production has been flat so far this year, averaging 10.9 million barrels per day in the previous week. The production rate has remained at the same level for five weeks.

The WTI-Brent spread remained less than 5 U.S. dollars after the higher Saudi oil exports and stagnant U.S. production.

Nowadays, the bearish sentiment has taken control in the market as the outlook of a total shut down of Iranian oil exports has weakened, as well as Libyan exports came back online and the Saudi Arabia has rapidly ramped up its production.

The market also felt a kind of nervous on sharp draw of U.S. commercial crude oil inventories, and particularly, a prevailing rumor said that the Trump administration is actively considering tapping into Strategic Petroleum Reserves (SPR) to rein in rising prices at the pump before congressional elections in November.

The market's expectation was 4.2 million barrels of decline in the U.S. commercial crude oil inventories, excluding SPR, but the EIA announced that the commercial crude oil inventories declined by 12.6 million barrels in the week ending July 6.

Anas Alhajji, an energy economist based in Dallas, U.S. state of Texas, stated that "Since there are no shortages in the oil market, any release of the SPR is politically motivated."

The oil market is sensitive to geopolitical issues. It will be watching very closely the Trump-Putin meeting in Helsinki next week.