A worker pours freshly drilled oil into a barrel at an oil field in Minhla, Bago Region, Myanmar (Photographer: Taylor Weidman/Bloomberg)

Oil Sputters as Economic Woes Outweigh U.S. Drilling Slowdown

(Bloomberg) -- Oil lost ground Friday after unnerving economic reports from China and the U.S., although the decline was moderated by the latest report of declining activity in America’s oil patches.

Futures in New York closed down 1 percent, after a monthly jobs report showed U.S. hiring was the weakest in more than a year and China said exports had tailed off in February. Still, prices recouped much of the losses after Baker Hughes said working oil rigs in the U.S. fell for the third straight week.

West Texas Intermediate crude eked out a 0.5 percent gain for the week, despite a barrage of tepid economic reports from around the globe.

“The bearish signs are more prevalent than any kind of bullish ones right now,” said William Rhind, chief executive officer at GraniteShares, a commodity-focused exchange traded fund. “You have a world that is slowing.”

Crude prices climbed more than 25 percent for the year through mid-February as the Organization of Petroleum Exporting Countries and its partners curbed output, and American sanctions on Iran and Venezuela tightened supplies.

But the rally has sputtered since then. This week alone, the European Central Bank cut economic forecasts, China reduced its goal for expansion and the OECD lowered its global projections. The U.S. also reported a surprisingly big jump in oil inventories.

West Texas Intermediate for April delivery closed down 59 cents at $56.07 a barrel on the New York Mercantile Exchange.

Brent for May settlement fell 56 cents, or 0.8 percent, to $65.74 a barrel on the London-based ICE Futures Europe exchange.

Economic Slump

In a possible sign that America’s jobs engine is starting to slow down, non-farm U.S. payrolls increased by a mere 20,000 in February, the Labor Department reported Friday. The median estimate in a Bloomberg survey had predicted a gain of 180,000.

The ECB cut its euro-area growth forecast for the year by the most since the advent of its quantitative-easing program four years ago. Even then, some of its policy makers thought the outlook was too optimistic. Earlier this week, the Paris-based Organization for Economic Cooperation and Development slashed its estimate for world economic growth to 3.3 percent in 2019, downgrading almost every Group of 20 nation’s economy.

“Worries over global economic growth prospects continue to be a big cap on oil prices,” said Vandana Hari, founder of Vanda Insights, a Singapore-based provider of oil market analysis. OPEC’s monthly report will “help shape market sentiment next week, with the market paying particular attention to any changes in global demand-growth forecasts,” she said.

Other oil market news
  • Gasoline futures slipped 0.2 percent to $1.8017 a gallon.
  • Norway took a partial step in divesting oil and gas stocks in its massive $1 trillion wealth fund, approving the sale of smaller exploration companies while sparing the biggest producers such as Royal Dutch Shell Plc and Exxon Mobil Corp. 
  • Mexico’s oil exports are getting heavier as its light crude production declines and sanctions on Venezuela leave a supply void. In the first week of March, Mexico’s scheduled crude shipments reached about 19 million barrels, of which 17 percent was Talam, the country’s extra heavy crude grade.

©2019 Bloomberg L.P.