Oil prices recorded their steepest weekly slump this year as concern grew that the trade row between the US and China would escalate, endangering global demand for crude, and as inventories unexpectedly hit their highest level since July 2017, pushing up supplies at a time of market uncertainty.
Crude, which climbed on Friday after plunging Thursday, was hit, in line with other parts of the market such as equities, after the US Commerce Ministry placed Huawei Technologies, the world's largest smartphone maker, in the so-called Entity List, effectively blacklisting the company from doing any business in the US.
Unsurprisingly, the isolation of Huawei contributed to a hardening of views in China and, on Thursday, China's Commerce Ministry Spokesperson Gao Feng called for a fair trade environment after new sanctions were imposed on 10 Chinese firms and three individuals from the country, urging the US to change its policies.
A CNBC report quoted Feng as saying early Thursday: "The US crackdown not only seriously damages the normal commercial cooperation between both countries, but it also forms a great threat to the security of the global industrial and supply chain." Late on Thursday, President Trump responded by telling the media that he expects the tariff row with China could be resolved quickly, including a resolution to the Huawei imbroglio.
On Tuesday, the Organization for Economic Cooperation and Development said global economic growth had stabilized but still remained weak following a "plunge" in the rate of increase in trade of goods and services, outlining the US-China spat as one of the biggest risks to the global economy.
The agency, which is projecting global growth of 3.2% in 2019, the second-lowest level since 2012, and 3.4% next year, said in its economic outlook that growth in trade in the first quarter was the weakest -- barely in positive territory -- since the first three months of 2016.
Oil prices dropped on Wednesday after the Energy Information Administration said inventories jumped by 4.7 million barrels over the week ended May 17 - that compared with expectations for a 599,000-barrel drop in a Reuters survey of analysts. The increase pushed the stockpiles to 476.8 million barrels, the strongest level since July 2017.
The EIA data also showed crude output in the US increased to 12.2 million barrels per day, just slightly below a record high.
Meanwhile, Baker Hughes (BHGE) said Friday the number of oil rigs operating in the US fell by five in the week that ended on May 24 to 797. The combined oil and gas rig count fell by four to 983 as gas rigs were up one to 186.
In Canada, the number of oil rigs in operation rose by 16 to 38 while gas rigs fell by one to 40 during the period under review. As a result, the North American total climbed by 11 to 1,061 versus 1,140 a year ago, the data showed.
Price: 22.33, Change: -0.73, Percent Change: -3.14
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