Oil prices were mixed for the week ending Aug. 23 amid growing concerns about U.S.-China trade tensions and impacts of U.S. active drilling rigs plunge, with the price of West Texas Intermediate (WTI) for October delivery down 1.28 percent and Brent crude oil for October delivery up 1.19 percent.
WTI closed the week at 54.17 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 59.34 dollars a barrel on the London ICE Futures Exchange, swinging around the 60-dollar-level during the week. WTI and Brent crude have increased 19.29 percent and 10.30 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, by and large, in the same directions, except Wednesday when WTI decreased 0.45 dollar to settle at 55.68 dollars a barrel, while Brent crude rose 0.27 dollar to close at 60.30 dollars a barrel, as investors digested a marked fall in U.S. crude inventories and closely followed up on the geopolitical tensions between Iran and the West.
Oil prices increased on Monday and Tuesday as investors kept a close eye on a drone attack on an oil field in Saudi Arabia on Saturday, causing concerns over global supply. WTI added 1.34 dollars and 0.13 dollar to settle at 56.21 dollars a barrel and 56.34 dollars a barrel in the first two days of the week, respectively, while Brent crude increased by 1.10 dollars and 0.29 dollar to close at 59.74 dollars a barrel and 60.03 dollars a barrel, respectively. Brent crude price stood at the 60-dollar-level again.
According to the U.S. Energy Information Administration (EIA) on Wednesday, for the week ending Aug. 16, U.S. commercial crude oil inventories decreased by 2.7 million barrels from the previous week, which resulted in oil prices settling mixed.
The decline in inventories was more than market forecast with 1.889 million barrels, implying greater demand and bullish for crude prices.
On Thursday and Friday, oil prices decreased as the market has been overshadowed by worries about weakening global crude demand due to escalating trade tensions between China and the United States. WTI declined 0.33 dollar and 1.18 dollars to settle at 55.35 dollars a barrel and 54.17 dollars a barrel, respectively, while Brent crude lost 0.38 dollar and 0.58 dollar to close at 59.92 dollars a barrel and 59.34 dollars a barrel, respectively.
In particular on Friday, oil prices plunged after China announced that it would levy additional tariffs on U.S. imports worth about 75 billion U.S. dollars in response to the newly announced U.S. tariff hikes on Chinese goods.
Energy investors in the global financial markets have turned on a risk-off mode amid deepening worries that escalating U.S.-China trade tensions would whittle down global demand.
Along with the sliding crude futures, energy equities also extended marked losses. The energy sector sank over 3.8 percent as of market close, the worst performer of the 11 primary S&P 500 sectors.
The sector involves a batch of oil and gas exploration and production companies, integrated power firms, refineries and other operations, which generate revenues tied to the prices of crude oil, natural gas and other commodities.
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 ongoing trade tensions between China and the United States 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. It has retreated from the area of weekly highs near 98.50 following fresh Chinese headlines on Friday, but the index managed well to stand at 97-level.
Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.
In the coming week, analysts expect the oil prices will under tremendous pressure due to the escalating trade tensions. Oil prices experienced a steep drop in early August, when the U.S.-China trade conflict was threatening to escalate into a currency war.
In particular, U.S. President Donald Trump announced the latest round of tariff hiking measures against goods imported from China Friday afternoon, after the stock market closed, which will likely lead to a stocks plunging open on the upcoming Monday.
Editor:Cherie
