Oil headed for its biggest weekly drop since December as the rapidly escalating trade war caused investors to reassess the outlook for global growth, drowning out concern over multiple supply risks.
Futures in New York rose as much as 0.9% Friday after plunging 5.7% the day before. Crude is being caught up in a stampede out of riskier assets driven by the White House’s blacklisting of Huawei Technologies Co. and several Chinese surveillance companies, moves that have been met with defiance by Beijing. A surprise jump in American oil stockpiles has also weighed on prices this week.
Anxiety over the trade war is taking precedence over a supply backdrop ripe with risks including a tense Middle East, a steadily deteriorating situation in Venezuela and production risks in Libya and Nigeria. The drop in oil prices will also give the Organization of Petroleum Exporting Countries and its allies more incentive to extend their production cuts beyond June.
“Bearish sentiment is increasing in the market, largely because of the US-China trade conflict, which is getting worse,” said Takayuki Nogami, the chief economist at Japan Oil, Gas and Metals National Corp. in Tokyo. “Crude may have limited upside next week” as economic indicators in various countries are likely to provide more evidence of the trade war’s impact, he said.
West Texas Intermediate crude for July delivery rose 46 cents, or 0.8%, to $58.37 a barrel on the New York Mercantile Exchange at 9:39 a.m. in Singapore after being up as much as 49 cents earlier. The contract is down 7% this week, heading for the biggest weekly loss since Dec. 21.
Brent for July settlement rose 44 cents, or 0.7%, to $68.20 a barrel on the London-based ICE Futures Europe exchange after tumbling 4.6% on Thursday. It’s fallen 5.5% this week. The global benchmark crude was at a $9.83 premium to WTI.