Oil is set for the biggest weekly decline since May as global demand concerns outweighed an OPEC+ pact to extend supply curbs into 2020 and worries that a renewed confrontation with Iran may threaten supplies.
Futures are down in New York from Wednesday’s close as anxieties over demand resurfaced this week following sluggish economic numbers from the US to China. The bleak figures overshadowed OPEC’s agreement to roll over supply curbs, while the seizure of a tanker carrying Iranian crude to Syria by British special forces on Thursday failed to spur prices.
Oil slumped 4.8% on Tuesday for its worst decline immediately after a meeting by the Organisation of Petroleum Exporting Countries in four years. OPEC’s decision to prolong curbs leaves the door open for US shale producers to grab more market share, as the group will have to cut deeper to achieve inventory targets, according to Goldman Sachs Group. American crude output resumed gains last week after dropping since the start of June.
"When bullish signals fail to lift the oil markets spirits, we should be very concerned this downtrend could run much further than expected," said Stephen Innes, managing partner at Vanguard Markets Pte. "The onslaught of global economic misery continues to blot out any bullish relief."
West Texas Intermediate oil for August delivery dropped 64 cents, or 1.1%, to $56.70 a barrel on the New York Mercantile Exchange as of 7:50 am in London. There was no settlement Thursday due to a holiday in the US and all transactions will be booked Friday. Prices are down 3% so far this week.
Brent for September settlement was unchanged at $63.30 a barrel on the ICE Futures Europe Exchange. Futures are down 4.9% this week. The global benchmark crude traded at a $6.48 premium to WTI for the same month.
Iran said the seizure of the tanker off Gibraltar was illegal and summoned the British ambassador to the Foreign Ministry in Tehran to explain. The diplomatic row heightened tensions just as the UK, France and Germany try to keep the Islamic Republic from walking away from an international deal to prevent the country developing nuclear weapons.
Bank of England Governor Mark Carney this week warned of dangers from rising protectionism around the world and said there could be a "widespread slowdown" that may require a major economic-policy response. In the US, a gauge of factory activity fell to the weakest level since October 2016, while the Caixin China PMI Manufacturing measure dipped below 50 for the first time in four months.