Oil Falls for 3rd Straight Week

05/10/19 03:58 PM EDT
By Dan Molinski 

--U.S. oil prices fell slightly Friday and ended lower on a weekly basis for a third straight week as testy U.S.-China trade talks unsettled the market and fueled concerns of weakening global oil demand.

--West Texas Intermediate futures, the U.S. oil benchmark, ended 0.1% lower at $61.66 a barrel on the New York Mercantile Exchange. For the week, WTI fell 0.5%, and is down 3.7% over the past three weeks.

--Brent crude, the global oil benchmark, was up 0.3% at $70.62 a barrel on London's Intercontinental Exchange.

HIGHLIGHTS

U.S.-China Trade: Oil prices rose sharply from January through most of April, but have turned lower the past three weeks, first due to an unexpected buildup of U.S. oil inventories, and now over concerns regarding the seeming lack of progress on trade talks between the U.S. and China. Talks broke off on Friday with no agreement announced, hours after the tariff level on $200 billion of imports from China was raised.

"Oil prices were under pressure on Friday as the fate of the U.S.-China negotiations remains unclear," said Alfonso Esparza, senior market analyst at Oanda. "The dispute between the two largest economies is putting downward pressure on energy prices as global growth forecasts would be impacted if a deal is not agreed. Energy demand would fall as economic growth slows."

Sanctions: Although oil fell for a third straight week, the decline was modest, and analysts said that is because fundamental factors regarding the current state of global supply and demand of oil remain supportive of prices. Tough U.S. sanctions against Venezuela and Iran have significantly curbed oil exports from those two countries -- both members of the Organization of the Petroleum Exporting Countries -- while crisis-torn Libya, also an OPEC member, is also on investors' radar.

"We could be on the verge of another oil rally," Phil Flynn, senior market analyst at Price Futures in Chicago, said in a note to clients Friday. "We still have supply risks and threats. Can't forget Venezuela, Iran, and Libya."

Sanctions on Iran that began last year have already pushed Iranian exports to below 1 million barrels a day from 2.5 million previously, while Venezuelan exports are slowing to a trickle as Washington tries to force embattled President Nicolás Maduro from power.

"Venezuelan exports may also fall further too, as the U.S. is likely to squeeze the country economically, implying further sanctions, following the failed uprising against the Maduro regime last week," said analysts at Energy Aspects in a note.

INSIGHT

Chevron Exits: Oil markets were also focused this week on a potential bidding war between Chevron Corp. and Occidental Petroleum, both of which wanted to buy shale-rich Anadarko Petroleum. But after Occidental made an offer higher than Chevron's initially accepted offer of $33 billion, Chevron decided to make no counteroffers, and instead will walk away with a $1 billion breakup fee.

"Chevron wields an enviable growth profile among the Majors. It is already a leader in U.S. tight oil, underpinned by its low-royalty, contiguous acreage position throughout the Permian," said Greig Aitken, director of M&A Research at Wood Mackenzie. "We thought Chevron had room to up its offer without destroying value -- and in oil and gas M&A, that's generally an achievement for any buyer. But it looks like Chevron wasn't content with just breaking even."

AHEAD

--The EIA's monthly Drilling Productivity Report, which details oil production from the U.S.'s main shale regions, is due for release Monday.

--OPEC's monthly oil market report is due Tuesday.

Write to Dan Molinski at dan.molinski@wsj.com

Write to Dan Molinski at Dan.Molinski@wsj.com

 

(END) Dow Jones Newswires

May 10, 2019 15:58 ET (19:58 GMT)

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