Oil rises in session but weekly trend falters
Concerns on oversupply and trade disputes sour market sentiment
Crude prices rose on Friday, but declined on the week on worries that oversupply would weigh on the US market while trade disputes and slowing global economic growth would dampen demand for oil.
US crude declined for the seventh consecutive week, and global benchmark Brent was dropped for a third week.
“One of the biggest concerns out there is that China’s demand numbers are coming down if China’s GDP growth is slowing,” said Tariq Zahir, managing member at Tyche Capital in New York.
Brent crude oil futures settled up 40 cents, or 0.6 per cent, at $71.83 (Dh263.83) a barrel, after touching a high of $72.49 earlier in the session.
US West Texas Intermediate crude futures (WTI) rose 45 cents, or 0.7 per cent, to $65.91, after touching a session high of $66.39. For the week, Brent was down 1.4 per cent, and US crude fell 2.6 per cent.
Falling prices have weighed on funds with oil exposure. Two of the world’s largest energy-focused hedge funds, Andurand Capital and BBL Commodities, suffered double-digit percentage losses in July as oil prices plunged by the most in two years, sources familiar with the matter told Reuters.
Money managers cut their net long US crude futures and options positions to the lowest in nearly two months in the week to August 14, the US Commodity Futures Trading Commission (CFTC) said.
Friday’s pull back from session highs came on mounting worries that US crude inventories would post another consecutive gain, said Bob Yawger, director of futures at Mizuho Americas.
US inventory build-up
US government data this week showed a large build up in crude inventories, with production increasing. “Investors remain cautious as Wednesday’s surprise gain in US stockpiles remained fresh in their minds,” ANZ bank said on Friday. The number of US oil drilling rigs, an indicator of future production, was unchanged this week at 869 rigs, much higher than the 763 rigs operating a year ago, according to energy company Baker Hughes.
Another major drag on prices was the darkening economic outlook on trade tensions between the United States and China, and weakening emerging market currencies that are weighing on growth and fuel consumption, traders and analysts said.
US investment bank Jefferies said there was a “lack of demand” for crude oil and refined products from emerging markets, while Singapore’s DBS bank said that Chinese data showed a “steady decline” in activity and that “the economy is facing added headwinds due to rising trade tensions”.
Japan’s MUFG Bank, meanwhile, said that the weakening Turkish lira will constrain further growth in gasoline and diesel demand this year.