Oil prices fell by about 2 per cent on Friday due to ongoing concerns about a global economic slowdown, but prices are set to end the week higher on US-China trade hopes.  Repsol photo.

Oil prices fall Friday, but remain on track for weekly gain

Oil prices fell under 2 per cent on Friday as investors grew increasingly concerned about a global economic slowdown, but crude futures are expected to end the week higher on US-China trade talks.

By 3:35 p.m., EST, benchmark Brent crude futures were down $1.09 to $60.59/barrel and US West Texas Intermediate futures dropped 87 cents to $51.72/barrel.

Despite Friday’s losses, both Brent and WTI are set for a second straight week of gains, with Brent up about 6 per cent and WTI gaining nearly 8 per cent.

Markets were buoyed earlier in the week while representatives from the United States and China conducted three days of talks.  While no concrete announcements were made, there is the possibility that higher-level talks will occur later in the month.

“Some of the strength that we’ve gotten from that seems to be coming out of the market,” Gene McGillian, vice president of market research at Tradition Energy told Reuters.

“Right now I think the market is in a holding pattern above our recent lows and it’s looking for its next driver,” McGillian said.

With recent economic data pointing to a global economic slowdown, investors remain concerned.

According to Reuters sources, with China gearing up to cope with rising US tariffs and falling domestic demand, Beijing is planning to set its economic growth target to between 6-6.5 per cent this year, compared to last year’s target of “around” 6.5 per cent.

“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” Hue Frame, portfolio manager at Frame Funds told Reuters.

Meanwhile on the supply side, OPEC’s supply cuts and falling Iranian crude exports are supporting the oil markets.

But, US crude production continues to rise.  The US Energy Information Administration reported US crude output hit a record high 11.7 million barrels per day.  Consultancy firm JBC Energy said this week that US oil output was “significantly above 12 million b/d” this month.

However, Baker Hughes reports that the number of US oil rigs fell by four this week to 873 as producers grow more wary about market conditions.  In Canada, the number of oil rigs rose 83 to 103.