Economy

Oil prices fall on surging US crude stockpiles, economic concerns

Oil prices fall on surging US crude stockpiles, economic concerns

The backdrop of rising U.S. oil inventories and concern over economic slowdown weighed on the oil prices resulting in Brent Crude oil losing most in calendar year 2019. It was still set for a decline of more than 5% this week.

Worldwide benchmark Brent crude was trading at $68.56 per barrel at 1100 GMT on Friday for a 5.4% weekly decline after it started Monday at $72.50 a barrel.

US crude oil inventories rose last week, hitting their highest levels since July 2017, the government's Energy Information Administration said on Wednesday, while industry data had also shown a surge in USA crude stockpiles. U.S. West Texas Intermediate crude added 75 cents at $58.66.

Furthermore, there is now evidence that the impact of the U.S. Equity markets also slumped, with six of every seven companies in the S&P 500 Index dropping after China assailed American sanctions and USA lawmakers proposed a ban on Chinese 5G technology. This was not good news after it was also learned there was a slowdown of U.S. refinery runs, despite the fact that we are coming up on the long Memorial Day weekend, the start of peak summer driving activity in the U.S. The EIA also said total motor gasoline stockpiles have increased by 3.7 million barrels during the week ended May 17, against forecasts for a drop of almost 816,000 barrels.

Oil stocks have been teetering since Monday when President Donald Trump moved to block Chinese technology giant Huawei from the US market as an extension of the tariffs he had been piling on China.

Instituting a tariff on US crude would not only potentially limit its options for acquisition but also undercut Beijing's argument that it is in such dire need of crude that it should be granted a waiver to continue importing oil from Iran, a waiver that Chinese companies are seeking to obtain to avoid USA sanctions.

"Supply management is here to stay", the bank said. China's decision to institute tariffs on gas, as a result, by imposing higher costs on US gas and sending potential buyers elsewhere, may be causing some investors to rethink whether to fund costly export infrastructure projects in the U.S.

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USA sanctions on the oil industries of Iran and Venezuela, both OPEC members, have curbed their crude exports, reducing supplies further than envisaged in the OPEC+ deal.

From mid-week, rising oil inventories in the United States started weighing on prices.

Global oil markets generally remain "well supplied" but also "thinly balanced" between supply and demand.

By way of a reminder, at the end of previous year, a "glut" is reported to have helped contribute to the fact that oil prices took a significant tumble to that $45 per barrel mark, that we all would like to forget happened.

OPEC heavyweight Saudi Arabia signaled that it could extend the supply cut agreement into the second half of this year to support oil prices.

The prospect that the Organization of the Petroleum Exporting Countries and its allies will continue its output cut pact later in the year was also supportive.