US crude posts 7th straight weekly loss, settling at $65.91, on weaker demand outlook

Key Points
  • U.S. crude posts its seventh consecutive week of losses, while Brent crude oil futures are set for a third straight weekly decline.
  • Traders say the main drags on prices are the darkening economic outlook due to U.S.-China trade tensions.
  • The latest U.S. government data shows a large build in crude stockpiles and rising production.
Oil pumpjacks in silhouette at sunset.

Crude prices edged higher on Friday, but posted yet another weekly decline on worries that oversupply would weigh on the U.S. market and that trade disputes and slowing global economic growth would slow demand for oil.

U.S. crude was on track for its seventh consecutive weekly decline and global benchmark Brent was set to drop 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.

U.S. West Texas Intermediate (WTI) crude futures ended Friday's session 45 cents higher at $65.91 a barrel, after touching a session high of $66.39 earlier. For the week, U.S. crude was down 2.5 percent, marking its longest losing streak in three years.

Brent crude oil futures were up 52 cents at $71.95 a barrel by 2:25 p.m. ET, after rising over $1 to hit a high of $72.49 a barrel. Brent was heading for a more than 1 percent weekly loss.

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Traders said the main drags on prices were the darkening economic outlook due to trade tensions between the United States and China, and weakening currencies in emerging economies that are weighing on growth and fuel consumption.

Friday's pull back from session highs came on mounting worries that U.S. crude inventories would post another consecutive gain, said Bob Yawger, director of futures at Mizuho Americas.

U.S. government data this week showed a large build up in crude inventories, with production also increasing.

"Investors remain cautious as Wednesday's surprise gain in U.S. stockpiles remained fresh in their minds," ANZ bank said on Friday.

The number of U.S. oil drilling rigs, an indicator of future production, were unchanged in the week at 869 rigs, according to a weekly report from energy company Baker Hughes on Friday. Last week, drillers added 10 oil rigs, the biggest rise since May.

Another major drag on prices was the darkening economic outlook on the back of 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.

U.S. 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".

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Japan's MUFG Bank, meanwhile, said that the weakening Turkish lira will constrain further growth in gasoline and diesel demand this year.

"Although emerging market contagion and China slowdown fears seem somewhat overstated, neither fundamental nor sentiment should provide support for higher commodity prices," Julius Baer Head of Macro and Commodity Research Norbert Rücker said.

Furthermore, just as demand seems to be slowing, supply looks to be rising, increasing the drag on markets.

Despite the bearish factors, analysts said prices were prevented from falling further because of U.S. sanctions against Iran, which target the financial sector from August and will include petroleum exports from November.

"Iranian crude exports were still near 2 million barrels per day (bpd) in July and will likely begin to fall dramatically in August with financial sanctions taking effect. With oil export sanctions now three months out, we expect exports to fall by more than 500,000 bpd by the end of 3Q," Jefferies said.