Oil Settles Lower on Global Growth Worries
U.S. light, sweet crude and Brent crude futures settled lower as political gridlock in Washington triggered automatic U.S. budget cuts, feeding fear about the economy in the world’s largest oil consumer.
Brent has dropped about $ 9 a barrel over the last three weeks since it hit a nine-month high of $ 119.20.
Fears about the global economy deepened after the White House and Republicans remained at loggerheads over the federal budget, setting off $ 85 billion in automatic spending cuts known as “sequestration”.
The International Monetary Fund (IMF) has warned the cuts could knock at least 0.5 percentage points off U.S. economic growth this year and weigh on the rest of the global economy.
“Despite some green shoots in the United States, the growth forecast remains mediocre, unemployment stubbornly high and economic data inconsistent,” said oil brokerage PVM in a note to clients.
Brent crude futures fell by 98 cents to settle at $ 110.41 a barrel on Friday, taking losses to the week to $ 3.69 a barrel and marking the lowest close in six weeks.
The contract traded between $ 111.36 and $ 109.82 during the session.
U.S. light, sweet crude fell by $ 1.37 on Friday to settle at $ 90.68 a barrel, the lowest closing price since early December.
For the week, front-month U.S. crude fell $ 2.45 a barrel.
Crude oil exports from the Organization of the Petroleum Exporting Countries also rose in February, a Reuters survey found, marking the first monthly increase since October and further weighing on prices.
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Supply from the 12-member Organization of the Petroleum Exporting Countries was 30.32 million barrels per day (bpd), up from 30.21 million bpd in January, the survey of shipping data and sources at oil firms, OPEC and consultants found.
Weak growth data out of Europe and China added to fears the global economic recovery is still sputtering.
European surveys showed British manufacturing shrank unexpectedly in February while France’s factories suffered their 12th straight monthly fall in output. Also falling was industrial activity in Spain and Italy.
In China, domestic and foreign demand slackened as the official Purchasing Managers’ Index (PMI) missed expectations, coming in at 50.1, the government said on Friday. This was its lowest reading since September.
Chinese data showing factory growth cooled in February also dampened the mood on commodity markets.
“China is the main economic and oil demand growth engine of the world,” said Dominick Chirichella of the Energy Management Institute in New York.
“If China’s manufacturing is slowing it strongly suggests that oil consumption in China is going to also slow.”