Oil closed down in New York for the first time in three days amid rising concerns about the likelihood of a global economic contraction and mounting supplies.
U.S. crude has fallen about 18% from a peak in late April and volatility has jumped as deteriorating U.S.-China trade relations cast a pall over the global growth outlook. Speculation that demand will weaken, mostly because of the U.S.-China trade war, continue to weigh on prices, said John Kilduff, a partner at hedge fund Again Capital.
“People are increasingly concerned about the prospects for a recession, and that and the more recent inventories build are weighing,” said Michael Lynch, the president of Strategic Energy and Economic Research in Winchester, Massachusetts. “There’s no real news to counter the sentiment so we are drifting down.”
Earlier Monday, Russian Finance Minister Anton Siluanov warned that oil could fall below $40 if OPEC+ countries don’t agree on an extension of production cuts. Al-Falih subsequently said that “we work in order to take preventive steps so as not to allow that scenario to happen.” Al-Falih has talked up the prospects for an extension, while Russia said Friday it’ll take coordinated action with the Saudis.
West Texas Intermediate futures for July slipped 73 cents to $53.26 a barrel at the close on the New York Mercantile Exchange. The contract jumped $1.40 to $53.99 on Friday and eked out its first weekly gain in three weeks.
Brent for August settlement dropped $1 to $62.29 a barrel on London’s ICE Futures Europe Exchange. It closed up 2.6% on Friday. The global benchmark crude was trading at an $8.6 premium to WTI for the same month.
The energy ministers of Saudi Arabia and Russia may be in Japan for the Group of 20 summit this month, providing “an opportunity to further calibrate our positions,” Al-Falih said in an interview with Russian news service Tass. The countries have so far stopped short of making any specific commitments on output volumes once the current OPEC+ agreement expires at the end of June.
Other oil-market news: American working rigs fell by 11 to 789 in the week through June 7, according to the Baker Hughes data. That’s the fourth drop in five weeks and takes the decline this year to 96. Hedge funds cut bets on WTI’s rally to the lowest level in 12 weeks, data showed Friday. Optimism on Brent crude declined by the most this year. Iran’s foreign ministry said new sanctions announced by the U.S. show Trump’s calls for negotiations with the Islamic Republic are hollow, the semi-official Iranian Students’ News Agency reported. North Sea crude will retain its attractiveness to South Korean buyers when the U.K. leaves the European Union following a deal between the two countries.