International Business: Oil recovers, but set for biggest weekly loss of 2019

Crude Oil

Oil prices rose toward $69 a barrel on Friday, snapping a two-day losing streak after U.S. President Donald Trump said that there is a "good possibility" of including Huawei in a trade deal to end a trade dispute with Beijing. Most of the loss can be attributed to a steep decline on Thursday, which produced the worst single-day performance in 2019.

Brent crude futures, the worldwide benchmark, settled down US$3.23, or 4.6 per cent, at US$67.76 a barrel.

Commercial U.S. crude inventories C-STK-T-EIA rose by 4.7 million barrels in the week ended May 17, to 476.8 million barrels, their highest since July 2017, the EIA data showed.

U.S. West Texas Intermediate (WTI) crude futures were down by 31 cents, or 0.5 percent, at $61.11 per barrel.

The long USA holiday weekend is expected to see the second-highest travel volume on record since motorists advocacy group AAA began tracking holiday travel volumes dating back to 2000.

The stock market continued its volatile downward spiral on Thursday fueled by fears of a worsening trade war between the US and China. Asian stocks tracked USA equities lower after the White House was said to be considering cutting off the flow of vital U.S. technology to five Chinese surveillance companies.

"U.S. businesses affected by the increased tariffs will be making decisions regarding purchases, inventories, etc., that are apt to force some downshifts in the US economic growth path that could have implications for USA oil demand", Jim Ritterbusch, president of Ritterbusch and Associates, said.

With that said, OPEC and its allies may come under pressure to boost production at the next meeting on June 25 as the rise in tariffs are expect to curb the purchasing power for USA and Chinese households, but the ongoing alliance may keep oil prices afloat in 2019 as the producers pledge to keep 'inventories under control'. The global oil benchmark was at a US$9.90 premium to WTI.

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A jump in US crude inventories primarily caused by low refinery runs helped drive prices lower.

USA sanctions on OPEC members Iran and Venezuela have curbed their crude exports, reducing supplies further.

Global oil markets generally remain "well supplied" but also "thinly balanced" between supply and demand. China's decision to institute tariffs on gas, as a result, by imposing higher costs on US gas and sending potential buyers elsewhere, may be causing some investors to rethink whether to fund costly export infrastructure projects in the U.S.

Countering these bearish factors are ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

A shipment of crude oil, by contrast, can often change hands multiple times between when it leaves port and arrives at its destination.

"It is reasonable to doubt whether Saudi Arabia will be willing to step up its output given the latest decline in prices", analysts at Commerzbank said.

By way of a reminder, at the end of past year, a "glut" is reported to have helped contribute to the fact that oil prices took a significant tumble to that $45 per barrel mark, that we all would like to forget happened.

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