Oil slips 2% as demand jitters overtake cuts

NEW YORK — Oil prices settled down about 2 per cent on Friday, ending around 3 per cent lower on the week as concerns over global demand growth after weak US manufacturing data overshadowed Opec-led supply cuts and sanctions on Venezuela and Iran.

After strengthening early in the session to over a three-month high, US crude futures turned sharply lower on demand worries. The ISM manufacturing activity index in February sank to the lowest since November 2016, and was below expectations.

US West Texas Intermediate crude (WTI) futures fell $1.42, or 2.5 per cent, to settle at $55.80 per barrel, after hitting $57.88, its highest since mid-November. Global benchmark Brent futures for May settled $1.24, or 1.9 per cent, lower at $65.07 a barrel.

Despite hitting their highest levels since mid-November this week, Brent futures ended the week 3.3 per cent lower and WTI dropped 2.7 per cent. “We have been the island of prosperity, globally, so if the economic slowdown is coming our way that is bad news for oil prices,” said John Kilduff, a partner at Again Capital in New York. “We were up all morning until that data hit,” he said.

The data sent a strong message to a market that has been looking for direction, said Phil Flynn, an analyst at Price Futures Group in Chicago. “I think the market is nervous, and when they got the data, they reacted,” he said.

The data compounded worries that demand is falling globally.

A Reuters poll showed analysts have grown more pessimistic over the prospects for a significant price rally this year, global fuel consumption is expected to dip this year in the face of a broad economic slowdown. China’s February factory activity fell for a third month. Its slowdown is being felt in the region.