Business

Oil heads for biggest weekly loss since mid-January

Latest Update: September 2, 2016 | 266 Views
Oil prices

SINGAPORE: Crude prices rose on Friday after losses of more than 3 percent a day earlier, with investors treading cautiously ahead of key U.S. employment data that will help gauge the health of the world’s largest economy and oil consumer.

Brent crude had climbed 27 cents to $45.72 a barrel by 0426 GMT, while U.S. West Texas Intermediate crude futures were up 24 cents at $43.40 a barrel, buoyed by a weaker dollar.

Though rising in this session, Brent and WTI are on track for their biggest weekly losses since mid-January, hit by oil inventory builds and weak U.S. manufacturing data.

“Downward momentum is a feature of the oil market,” said CMC Markets analyst Ric Spooner.

“The end of the U.S. driving season and the prospect of building inventories create downward risk for the oil price and may see further pressure on energy stocks today.”

Investors are looking ahead to non-farm payroll data later in the day for a sense of the direction of the U.S. economy, with a strong reading seen boosting the chance of a Federal Reserve interest rate hike soon.

A rate rise may strengthen the U.S. dollar, which could depress oil prices as it would make the dollar-denominated commodity more expensive for holders of other currencies.

Friday’s oil price gains may be capped by concerns of slowing global economic growth. There is also growing scepticism among traders that the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia will agree to freeze production at a meeting in Algeria later this month.

However, lending credence to a freeze, Saudi Arabia, the world’s biggest crude exporter, has appeared to change its stance and is likely to support production stabilization at the meeting.

But further clouding the issue, Russian Energy Minister Alexander Novak on Friday played down the potential for talks on a possible output freeze.

Additionally, more U.S. supply will return to the market as some producers in the eastern parts of the Gulf of Mexico are restarting operations after Hurricane Hermine is set to make landfall.

Manufacturing activities in parts of Asia, which accounts for most of the world’s oil demand growth, has also slowed.

“Most of Asia depends on exports, and without demand picking up in the west and on the mainland (of China), it’s hard to see a sustained rebound in trade,” HSBC economist Frederick Neumann said in a note.

Reuters