Oil prices fell over two per cent on Friday as the US stock market took another hit and economic data released from China indicated lower fuel demand from the world’s largest importer of crude. Chevron photo.
Oil prices down on pre-weekend profit taking
Oil prices were down over two per cent on Friday as the US stock market continued to falter and economic data from China indicated weakening crude demand.
By 2:02 p.m., EST, benchmark Brent crude futures were down $1.26 to $60.19/barrel and US West Texas Intermediate fell $1.21 to $51.37/barrel.
Brent is on track for a weekly loss of about 1.7 per cent while US WTI is set to record a weekly loss of about 1.9 per cent.
Jim Ritterbusch, president of Ritterbusch and Associates, said in a note “The oil complex remains vulnerable to heavy selling into the equities especially when combined with a strengthening in the US dollar as is the case so far today”.
According to Reuters, China’s November retail sales grew at their weakest pace since 2003 and industrial output was up the least in nearly three years, prompting a drop in US equity markets.
As well, Chinese oil refinery throughput last month dropped from October. This suggests easing oil demand despite runs 2.9 per cent above levels at this time last year.
“The energy complex is on the back foot this morning as a batch of soft Chinese economic data triggers a flurry of pre-weekend profit-taking,” PVM Oil analyst Stephen Brennock told Reuters.
To ease oversupply concerns, OPEC and its allies agreed last week to cut their overall production by 1.2 million barrels per day, or over 1 per cent of global demand.
“For the time being until the OPEC cuts start kicking in, the market is oversupplied in the short term,” Tony Nunan, oil risk manager at Mitsubishi Corp told Reuters. “If China is slowing down, that’s definitely a concern.”
On Thursday, the International Energy Agency forecast a shortage in crude supply by the second quarter of 2019 should OPEC and its allies comply with the supply cut. Saudi Arabia says it will cut its output to 10.2 million b/d in January.
The IEA maintains its forecast that global oil demand growth will hit 1.4 million b/d.
Barclays said on Friday that it expects oil prices to recover in the first half of next year due to the expected supply shortage due to Saudi Arabia’s production cuts and the US sanctions on Iranian crude.
On Friday, Baker Hughes reported the US oil rig count fell by four to 873. In Canada, the oil rig count dropped by seven to 95.