Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[William Watts and Neandra Salvaterra, MarketWatch]
Oil futures traded slightly lower Friday, pressured by concerns over a potential trade war and U.S. supplies, leaving crude on track for a hefty weekly loss.
April West Texas Intermediate crude CLJ8, -0.97% shed 19 cents, or 0.3%, to $60.80 a barrel on the New York Mercantile Exchange. The U.S. benchmark is on track for a 4.3% weekly decline. The global crude benchmark, May Brent UK:LCOJ8 fell 14 cents, or 0.2%, to $63.69 a barrel on the ICE Futures Europe exchange, set for a weekly fall of more than 5%.
President Donald Trump on Thursday said he would impose tariffs on steel and aluminum imports, stoking fears of a global trade war and contributing to a global equity selloff.
While trade-war fears dented overall risk appetite, tariffs offer a reason to be bullish on crude, said Phil Flynn, senior market analyst at Price Futures Group, in a note. That’s because the tariffs would raise the cost of production for crude given that steel is used in almost very part of the industry from production, refining and processing, and distribution of refined products.
“This tariff, if put in place, should not derail global growth drastically so even at higher costs we should see demand stay strong. It will also reduce future oil production,” Flynn said. “That could change if we get into a full-fledged trade war but with so much to lose from our trading partners, I do not think that is going happen.”
A surge in North American crude output also has the market worried, despite efforts by the Organization of the Petroleum Exporting Countries and external producers such as Russia to limit global crude production.
On Wednesday, the U.S. Energy Information Administration reported that crude oil stockpiles rose by 3 million barrels in the week ended Feb. 23, a greater increase than anticipated by most analysts.
Investors will be watching for rig-count data from Baker Hughes Inc. on Friday. The firm’s weekly data on the number of rigs drilling for oil in the U.S. is seen as a bellwether for activity in the sector.
April natural gas NGJ18, +0.22% rose 0.5 cent, or 0.2%, to $2.703 per million British thermal units.
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