WTI closed the week at 54.50 US dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 58.53 dollars a barrel on the London ICE Futures Exchange, plunging below the 60-dollar-level. WTI and Brent crude have increased 20.02 percent and 8.79 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 in the same directions: oil prices bounced back after three consecutive days fall.
Oil prices markedly dropped in the first three days of the week, as the market has been overshadowed by rising concerns over trade tensions between the United States and China. Moreover, the market was rattled on Wednesday by an unexpected surge in US inventories amid ongoing anxiety over ebbing global energy demand.
US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 2.385 million barrels during the week ending Aug. 2, defying the market forecast drop of 2.845 million barrels, implying weaker demand and bearish crude prices.
In the first three days of the week, the WTI decreased by 0.97 dollar, 1.16 dollars and 2.54 dollars to settle at 54.69 dollars a barrel, 53.63 dollars a barrel and 51.09 dollars a barrel, respectively, while, Brent crude fell 2.08 dollars, 0.87 dollar and 2.71 dollars to finish at 59.81 dollars a barrel, 58.94 dollars a barrel and 56.23 dollars a barrel, respectively.
The plunges came following significant gains last Friday, when US oil futures rose 1.71 dollars and Brent crude climbed 1.39 dollars. Such rallies were driven by geopolitical tensions between Iran and the West in the region, which harmed flow of crude through the Strait of Hormuz.
On Thursday and Friday, oil prices bounced back, as investors grew hopeful for potential oil supply cut after Saudi Arabia reportedly planned to slash exports in the near future, as well as the number of US active oil rigs declined sharply in the week ending Aug. 9.
Saudi Arabia, one of the world’s largest oil suppliers, will cut foreign sales by 700,000 barrels a day and scale back production in September, according to media reports. Analysts said the news gave investors a timely relief amid broad fears over weakening global energy demand.
Meanwhile, US oil rig count dropped by six to 764, marking the lowest level since February 2018, and the reading was also 105 less than the 869 of the same week last year.
The WTI rallied 1.45 dollars and 1.96 dollars to settle at 52.54 dollars a barrel and 54.50 dollars a barrel, respectively, while Brent crude rose 1.15 dollars consecutively to close at 57.38 dollars a barrel and 58.53 dollars a barrel, respectively.
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 recently, mainly because of the concerns over downturn in demand for crude oil. Furthermore, the prolonged trade worries 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.
The International Energy Agency (IEA), based in Paris, France, released its latest “Oil Market Report” on Friday, cutting its global oil demand growth forecasts for this year and next, citing fears of an economic downturn as the US-China trade disputes cast a shadow over markets.
From January to May, the growth of oil demand hit the lowest since the financial crisis in 2008. According to the IEA, global oil demand growth in the first half of the year was “very sluggish.”
The IEA said the outlook for oil demand growth is “fragile,” with a greater likelihood of a downward revision than an upward one.
Moreover, a rising US dollar in the past months has dragged down the greenback-denominated crude futures, as the US Dollar Index has been keeping uptrend since mid-2018.
In the week ending Aug. 9, US Dollar Index managed to stabilize over 97.00 level after the recent drop at the start of August.
Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.