Oil prices dropped on Friday as clouds gathered over the global economy after the European Central Bank, ECB, warned overnight of continued weakness and fresh data showed Chinese exports and imports slumped last month.
With surging U.S. supply also unsettling markets, international benchmark Brent crude futures were at 65.78 dollars per barrel at 0528 GMT, down 52 cents, or 0.8 per cent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at 56.25 dollars per barrel, down 41 cents, or 0.7 per cent.
Financial markets, including crude oil futures, took a hit after ECB President Mario Draghi said on Thursday the economy was in “a period of continued weakness and pervasive uncertainty”.
Europe’s economic weakness comes as growth in Asia is also slowing down.
So far oil demand has held up, especially in China where imports of crude remain above 10 million barrels per day (bpd).
Yet a slowdown in economic growth will at some point likely dent fuel demand, putting pressure prices.
China’s February dollar-denominated exports fell 21 per cent from a year earlier, coming in far worse than analysts’ expectations, while imports dropped 5.2 per cent, official data showed on Friday.
On the supply side, prices have been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
Together with some non-affiliated producers like Russia, the producer group has pledged to withhold around 1.2 million barrels per day (bpd) of supply to tighten markets and prop up prices.
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But these efforts are being undermined by soaring U.S. crude oil production, which has increased by more than 2 million bpd since early 2018, to an unprecedented 12.1 million bpd.
That makes America the world’s biggest producer, ahead of Russia and Saudi Arabia.
Investment bank Jefferies said on Friday that U.S. output growth was largely being fueled by onshore shale production, which had recently benefited from an expansion driven by investments from oil majors Exxon Mobil and Chevron.
“The majors bring scale, steady capital investment and science to the play and could lead the basin to a higher growth trajectory – which in turn could cap the upside in oil prices,” the U.S. bank said.
NAN
