Americas News
Crude Ends the Week Soft as Market Faces Multiple Unknowns
As expected by many analysts, crude prices on Friday resumed their trajectory downward, this time due to a drop in the U.S. equities market, an easing of trade tensions between the U.S. and the European Union, and Saudi Arabia's suspension of oil shipments through the Red Sea's Bab al-Mandeb strait.
West Texas Intermediate fell 92 cents to settle at $68.69 per barrel, marking a fourth week of declines, while Brent fell 25 cents to settle at $74.29 per barrel but earned a 1.8 percent weekly increase, its first increase in a month.
Traders shrugged off widespread headlines on Friday of the U.S. economy growing in the second quarter at its fastest pace in nearly four years, because, according to Phil Flynn, senior market analyst at Price Futures Group Inc., "it came in line with expectations, but when you're running that kind of a GDP, that's a lot of oil."
He added, "It was a strong number that suggests strong energy demand into the end of the year."
Contradicting this outlook was Phillip Streible, senior market strategist at RJO Futures, who said in relation to U.S. stock markets broadly falling on Friday, "That could show some sign of a slowdown in the economy, which could in turn affect oil consumption."
Helima Croft, global head of commodity strategy for RBC Capital Markets, suggested that too many elements are in play to determine with any certainty what's in store for crude down the road: she told CNBC that oil prices are in a constructive period, "particularly as we go into the last quarter of the year when we're going to see so many Iranian barrels come off the market.
"In terms of the supply picture it's actually set to tighten, while demand is holding up - though there are fears about the trade wars."
Croft was reluctant to determine where crude prices will wind up "because there are all these intangibles," including the effect of the U.S. sanctions against Iran and other geopolitical events.
But one thing is certain about such an unpredictable landscape: even the most unlikely players stand a chance at identifying and seizing business opportunities.
That seems to be the case with Brazil's state-controlled Petrobras, which will market a new medium-sweet crude grade to China by as early as this October, according to two sources with knowledge of the matter.
The new supply could help lift Petrobras' crude oil exports, which dropped 53.8 percent in June from a year ago to 696,000 barrels per day; its destination to China is said to have been made possible because buyers there are cutting imports from the U.S. as Beijing imposes tariffs on U.S. crude in retaliation against similar moves by Washington.
Even though the top crude experts occasionally seem to be too overwhelmed by events to risk any specific forecasts, the growing consensus in analytical circles is that despite what skeptics say, countries such as Saudi Arabia and Russia can easily increase output to offset market tightening, and even the familiar worry of lack of industry spending is overblown because companies are producing crude far more efficiently than ever before.
For those precise reasons and others, Citigroup Inc. earlier this week stated that Brent will return to a trading range of between $45 and $65 per barrel by the end of 2019.
