Americas News
Worst Weekly Loss of 2019 for Crude With Oversupply Now Acknowledged as the Culprit
Hot on the heels of a dismal drop in prices on Thursday, crude trading on Friday earned the dubious distinction of contributing to the worst week of trading for the commodity for 2019 to date, as oversupply dominated analytical worries.
The upcoming long U.S. and United Kingdom long weekends and the attendant rise in travel volumes caused Brent on Friday to rise 93 cents to $67.69 per barrel - but the global benchmark still posted a weekly loss of over 4.5 percent.
West Texas Intermediate rose 1.2 percent to $58.63, but it recorded a one-week loss of more than 6 percent, its biggest of 2019.
The reason for the week's losses was the familiar one-two punch of U.S. crude inventories having risen to their highest since July 2017, and worries that the U.S.-China trade conflict is developing into a more entrenched dispute that will surely negatively impact economies in many parts of the world and thus reduce oil demand.
Jim Ritterbusch, president of Ritterbusch and Associates, spelled out what he thinks will happen on the trading floor in the days to come: “A decline below our expected next support level of $56 [for WTI] will likely associate with a further plunge in equities that would be heavily related to unresolved trade issues between the U.S. and China ... volatility across all markets will be heightened until some significant trade progress is seen.”
Hadley Gamble, CNBC television contributor, told that network's `Closing Bell' that she acknowledged the curious phenomenon of geopolitical tensions rising but oil prices falling: "There's just so many different variables here: the market is oversupplied at the end of the day," and she added that despite the U.S. sanctions against Iran, crude export from that country "will never get to zero."
She went on to state that "Yes, it's playing well domestically to have these lower oil prices, but internationally, foreign policy wise, who does all of this benefit? The Chinese."
Barbara Doran, managing member at BD8 Capital Partners, told CNBC that "The problem with oil right now is not only concerns about [trade wars] but that we're oversupplied; even if Iran came completely off, [U.S.] shale production is up hugely in the last six months, you got Iraq on, etcetera etcetera."
Playing the contrarian role on Friday was Commerzbank, whose analysts stressed that the shortages of crude from Iran as well as Venezuela should not be underestimated: “It is reasonable to doubt whether Saudi Arabia will be willing to step up its output given the latest decline in prices; we therefore expect to see higher oil prices again in the near future.”
Similarly, Bob Yawger, director of futures at Mizuho Securities USA, was upbeat in his assessment of the market in near-term: "There’s no doubt that concerns about the U.S.-China trade situation are still around, and there is some negativity in the market; but with that said, it’s driving season and that means you get an overwhelming spike in demand in the U.S. and everywhere else.
"It looks like there could be some upside."
