Oil prices edged up for the week ending Aug. 16 amid easing concerns about U.S.-China trade tensions and impacts of U.S. active drilling rigs decline and crude oil inventories buildup, with the price of West Texas Intermediate (WTI) for September delivery up 0.68 percent and Brent crude oil for October delivery up 0.19 percent.
WTI closed the week at 54.87 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 58.64 dollars a barrel on the London ICE Futures Exchange, plunging below the 60-dollar-level again. WTI and Brent crude have increased 20.83 percent and 9 percent, respectively, so far this year, falling from their peak levels in April when the growth of WTI hit over 40 percent, and Brent crude over 30 percent.
During the week, WTI and Brent crude moved in the same directions: three-day gains outnumbered two-day loss. oil prices bounced back on Friday following two consecutive days dip, extending positive sentiment into the upcoming week.
Oil prices surged on Tuesday after their edging up during the previous session. The WTI added 0.43 dollar and 2.17 dollars to settle at 54.93 dollars a barrel and 57.10 dollars a barrel in the first two days of the week, respectively, while Brent crude increased by 0.04 dollar and 2.73 dollars to close at 58.57 dollars a barrel and 61.30 dollars a barrel, respectively. Brent crude price surpassed the 60-dollar-level again after it plunged below the level on Aug. 5 and remained operating under 60 dollars all the week.
The increases were driven by positive sentiment emerging in the energy market. Investors' long-time oversupply concerns were eased by a decline in U.S. active oil drilling rig count, which dropped six to 764 in the week ending Aug. 9, marking the lowest level since February 2018.
In particular, investors' concerns over U.S.-China trade tensions eased when senior Chinese official Yang Jiechi met with U.S. Secretary of State Mike Pompeo in New York on Tuesday to exchange views on China-U.S. relations. The two sides decided to have this meeting after consultations.
On Wednesday and Thursday, oil prices declined as unexpected builds in U.S. crude inventories weighed on the market. Investors worried about possible economic recession.
The WTI erased 1.87 dollars and 0.76 dollar to settle at 55.23 dollars a barrel and 54.47 dollars a barrel, respectively, while Brent crude decreased by 1.82 dollars and 1.25 dollars to finished at 59.48 dollars a barrel and 58.23 dollars a barrel, respectively.
U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 1.58 million barrels during the week ending Aug. 9, about 3 percent above the five-year average for this time of year.
"Crude inventories climbed for the second straight week to plus 1.6 million barrels, counter to the consensus of a 2.8 million barrels draw," said Crawford Kob, an energy analyst with Houston-based investment bank Tudor Pickering Holt & Co., in an e-mail. He believed "that is adding fuel to the fire of (Wednesday's) rough energy market."
"Overcapacity could drive down rig counts," Joe Romm, former CEO of FrontPageLive.com, and current editor-in-chief of the think tank Think Progress's Climate Progress online magazine, told Xinhua.
Meanwhile, Germany, the economic engine in the European Union, announced that its gross domestic product contracted 0.1 percent in the second quarter of 2019.
Many analysts contributed the growth downturn in Germany to trade tensions between the world's leading economies, as German economy relies heavily on exports.
Data showed that the eurozone economy slowed to a 0.2 percent growth rate in the second quarter, according to Eurostat.
In particular, on Wednesday, the yield on the benchmark 10-year Treasury note briefly broke below the 2-year note rate, a recession signal in the eyes of bond investors.
Analysts said market participants were worried that global economic downturn would further impact oil demand.
Oil prices rose on Friday as strong U.S. data eased investors' worries over a possible economic recession. The WTI added 0.4 dollar to settle at 54.87 dollars a barrel, while Brent crude increased by 0.41 dollar to close at 58.64 dollars a barrel.
U.S. consumers' spending increased in July, as retail and food services sales rose 0.7 percent to 523.5 billion U.S. dollars. However, the gains were capped as the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for world oil demand growth in 2019 by 40,000 barrels per day to 1.1 million barrels year on year.
On Friday, OPEC issued its monthly report showing that it cut its crude production in July, as it continues to combat lower oil prices around the globe.
Oil prices have kept gaining momentum since the start of the year due to some geopolitical concerns and OPEC's decision of production cut. The momentum has slowed down, mainly because of the concerns over downturn in demand for crude oil. Furthermore, the prolonged trade worries reignited concerns over weakening demand for oil.
The slowing global economy continued to be a major headwind for crude oil. The slower economic growth of the world will lead to less demand for oil, which in turn would put downward pressure on oil prices.
Moreover, a rising U.S. dollar in the past months has dragged down the greenback-denominated crude futures, as the U.S. Dollar Index has been keeping uptrend since mid-2018.
In the week ending Aug. 16, U.S. Dollar Index closed up, ending the week above 98.10 support after the recent drop at the start of August.
Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.
For the upcoming week, analysts believe the concerns over the global trade prospects will remain. Trade tensions could lead to further global economic slowdown, and reduce demand for crude oil.
The only thing that can send crude prices higher is a major political event or the "intervention by the Organization of Petroleum Exporting Countries (OPEC)," said Crawford Kob.
Editor:Cherie
