Oil prices plunged on Friday with New York futures falling about $5 a barrel. Precipitating the fall were concerns that there is no end in sight to the US-China trade war and that the global economy could slow by enough to affect oil demand. Prices rebounded about 1 percent on Friday but closed out the week at $58.62 in New York and $68.20 in London for their biggest weekly drop of the year. US crude oil inventories rose by 4.7 million barrels the week before last, hitting their highest levels since July 2017, mainly due to abnormally low refinery runs (89.9 percent of capacity) for this time of the year.
The struggle between fears that the US sanctions will lead to an oil shortage and the intensifying US-China trade war will lead to a depression continued last week. Oil prices fell on Monday, climbed smartly for three days, and then fell again on Friday as the trade war took a turn for the worse. The week ended with prices higher — $62.76 in New York and $72.21 in London.
Uncertainty was the watchword of the week as oil traders juggled the faltering US/China trade deal, increasing tensions in the Middle East, and falling US crude stocks. Oil futures gyrated in a narrow range closing at $70.62 in London and $61.68 in New York with a small weekly loss. The EIA reported a 4-million-barrel drop in US crude inventories the week before last, and there remains a question as to how fast US oil production is increasing. Brent crude futures have opened up a steep backwardation, evidence that the physical market for crude is tightening. Given that Iranian exports are plunging, Russia’s are temporarily lower due to contaminated oil, and the future of Libyan and Venezuelan oil exports is cloudy, higher oil prices would seem to be coming. Some financial institutions are bullish for oil.
After climbing more than $20 a barrel from $52 in late December to nearly $75 on April 23rd, prices have fallen back so that Brent closed at $70.85 on Friday. Despite threats to the oil supply from the geopolitical situations in Iran, Libya, Venezuela, and Nigeria, prices have been falling for the last two weeks. Last week prices fell to recent lows after the US stocks’ reports showed unexpected crude oil builds for two weeks in a row and EIA said that US oil production was growing again after holding steady for two weeks. It takes about 60 days to compile accurate US production data. EIA estimates and forecasts of US production have been a bit shaky of late so we will not know if the prediction that US shale oil output grew by 84,000 b/d to a record of 8.4 million in March is correct until the end of this month.