Crude fell on Friday amid a lack of progress in negotiations over the COVID-19 economic relief program and as tensions mounted after President Donald Trump announced a ban over the Chinese owners of TikTok and WeChat, undermining positive fundamentals such as strong China demand and the US oil rig count hitting a 15-year low.
The West Texas Intermediate futures dropped by 1.7% to $41.22 intraday, along with its international counterpart, Brent, which slid by 1.5% to $44.11. For the week, the duo traded higher.
Democratic congressional leaders and The White House are yet to agree on the fifth stimulus relief bill, casting doubt over the timing of more financial help reaching millions of unemployed people in the country marred by the global health pandemic.
President Trump on Thursday prohibited by an executive order US dealings with ByteDance, the Chinese owner of TikTok, and Tencent, which is the operator of WeChat, in what is seen as a serious escalation of tensions between the two economic superpowers. The ban will be effective in 45 days, giving some time for negotiations.
Meanwhile, China imported 25% more crude oil in July, 51.3 million tons, than it did a year ago, Commerzbank said in a report. Contrary to expectations, the Saudi Official Selling Prices for September unveiled Thursday "fell hardly at all," which indicates supply in the oil market "remains tight." Iraq has agreed to cut output by an additional 400,000 barrels per day in August to offset its previous breaches of production quota.
"All of this supportive news is falling on deaf ears today," Commerzbank's Head of Commodity Research Eugen Weinberg said in the report. "In recent months, sentiment on the oil market has apparently been more important than the fundamental situation."
The US added 1.76 million jobs in July, topping the consensus on Econoday for a gain of 1.68 million. The unemployment rate slipped to 10.2% from 11.1% in June, according to data from the Bureau of Labor Statistics, beating the Street's view for 10.5%.
On Wednesday, the US Energy Information Administration said crude oil stockpiles plummeted by 7.4 million barrels during the week that ended July 31. In a Reuter's poll of analysts, the expectations were for a decline of three million barrels.
Two days later on Friday, data compiled by Baker Hughes (BKR) showed the US oil rig count fell by four to 176 during the week that ended Aug. 7, its lowest level since July 2005. The combined oil and gas rig count, which stood at 793 on March 6, was also down by four to 247 last week. Gas rigs were flat at 69.
In Canada, the oil rig count rose by two to 13 and the gas rig count was up by one to 34 during the period under review. As a result, the aggregate count for North America slipped by two to 294, compared with 1,074 a year earlier.
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