What’s happening: WTI crude prices extended their losses on Friday to record the first weekly decline in several weeks.
What happened: Both benchmarks slipped slightly on the last trading day of the week but printed losses of more than 8% for the week. This was the first weekly decline after the bullish run since April.
Oil prices came under pressure due to rising oversupply concerns, despite the OPEC (Organization of the Petroleum Exporting Countries) and its allies agreeing to cut crude production. The recent spike in US coronavirus cases fuelled fears of a second wave of the pandemic disrupting economies and demand for oil. The US announcing a surprise increase in its crude inventories didn’t help either.
Why it matters: Various states in the US have been witnessing a rise in new infections following their reopening efforts, stoking fears that the pandemic is still far from over and the economy will need to reopen more gradually than was earlier hoped.
Meanwhile, the IMF’s (International Monetary Fund) Chief Economist, Gita Gopinath, said that the global economy is rebounding at a slower-than-expected pace.
The rise in crude oil inventories in the US also exerted pressure on oil prices, with the stockpiles climbing to a record 538.1 million barrels last week following low-priced imports from Saudi Arabia. On the other hand, the number of active oil drilling rigs in the US were reduced by 7 to 199 last week, Baker Hughes reported.
WTI (West Texas Intermediate) crude for July delivery slipped 0.2% to settle at $36.26 per barrel on the NYMEX (New York Mercantile Exchange) on Friday, after recording its biggest single-day decline since April 27 in the previous trading session, falling 8.2%.
Brent for August delivery rose 0.5% to settle at $38.73 per barrel, after dropping 7.6% on Thursday.
The US benchmark recorded a weekly decline of 8.3%, while Brent fell 8.4% for the week.
In other commodity news, July natural gas declined 4.5% to $1.731 per million British thermal units on Friday, recording a loss of 2.9% for the week.
What to watch: Crude oil is likely to remain under pressure today with the continued rise in new covid-19 cases adding to concerns over the global economy. WTI crude oil traded down 3.5% in the Asian session. Investors continue to be optimistic about oil prices, although the rise is now expected to be at a much slower pace than the climb after April’s sell-off.