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Oil ends nearly 3% lower Friday as traders react to Trump's plea to OPEC for cheaper crude

By Myra P. Saefong / Marketwatch

Petroleumworld 04 26 2019

Oil futures dropped by nearly 3% on Friday as traders weighed uncertainty tied to President Donald Trump's plea to OPEC to lower prices.

“Gasoline prices are coming down. I called up OPEC, I said you've got to bring them down. You've got to bring them down,” Trump told reporters Friday.

But oil prices managed to finish off the session's worst levels after the Organization of the Petroleum Exporting Countries' Secretary General Mohammed Barkindo said he hasn't spoken with Trump, nor has Saudi Arabia's energy minister Khalid al-Falih, according to The Wall Street Journal, citing people familiar with the matter.

As oil futures settled, Trump tweeted that he “spoke to Saudi Arabia and others about increase oil flow.”

Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement. The California tax on gasoline is causing big problems on pricing for that state. Speak to your Governor about reducing. Economic numbers, 3.2% GDP for what is often worst quarter, looking good!

When asked why Trump's statements tend to have an immediate impact on oil, James Williams, energy economist at WTRG Economics said “the market overreacts to his tweets, but he can also extend sanction waivers and also sell more oil from the [U.S. Strategic Petroleum Reserve].”

Against that backdrop, U.S.-based West Texas Intermediate crude for June delivery CLM9, -3.70% fell $1.91, or 2.9%, to settle at $63.30 a barrel on the New York Mercantile Exchange. WTI fell 1.2% for the week, following seven consecutive weeks of gains, according to Dow Jones Market Data.

Prices also pared losses after data from Baker Hughes BHGE, +0.04%  implied a slowdown in oil-drilling activity. The data Friday revealed that the number of active U.S. rigs drilling for oil dropped for a second straight week , down 20 to 805 this week.

June Brent crude LCOM9, -3.74% the global benchmark, fell $2.20, or about 3%, at $72.15 a barrel on ICE Futures Europe. The most-active Brent crude contract edged up by 0.3% for the week, up a fifth straight week.

Read: Here's a ‘surefire sign' crude-oil supplies are running tight as users ‘scramble for barrels'

Also read: Here's what $100-a-barrel oil would do to the global economy

Earlier this week, prices for U.S. and global benchmark crude had marked their highest settlements in nearly six months.

“Clearly, prices had been technically ‘overbought' and a correction of some sort was imminent. It remains to be seen how far oil prices will fall given the still supportive market conditions, with the OPEC+ group of producers continuing to restrict supply and the U.S. government tightening sanctions against Iran,” said Fawad Razaqzada, market analyst at Forex.com.

Crude's multiday rise had come on the heels the U.S. decision to end waivers for countries importing Iranian oil, as part of a bid by the Trump administration to push Iran's exports to zero. The current waivers expire on May 2.

Read: The end of Iranian oil waivers and what it means for the OPEC-led output cut pact

‘There will be ups and downs, but the market will be ruled between now and the June OPEC meeting by facts and rumors related to the Iranian sanctions.' James Williams, WTRG Economics

“There will be ups and downs, but the market will be ruled between now and the June OPEC meeting by facts and rumors related to the Iranian sanctions,” said WTRG's Williams.

Saudi Arabia's energy minister Khalid al-Falih told Reuters on Thursday that China has “not yet” asked for more crude oil, despite the U.S. decision to end waivers. “That could be an indicator that the Chinese may refuse to cut any more Iranian imports,” said Williams.

Brent prices on Thursday initially got a lift from news that Poland and Germany suspended imports of Russian crude via the Druzhba pipeline, the world's longest oil pipeline, citing contamination, according to a report from Reuters . About 700,000 barrels a day of the pipeline's 1 million-barrel a day capacity was suspended, the report said. S&P Global Platts said Thursday that a Russian official was reported as saying he expects the issue to be resolved by Monday.

Back on Nymex, May gasoline RBK9, -2.30%  fell 1.5% to $2.101 a gallon, for a weekly rise of 1.4%. May heating oil HOK9, -2.73% fell 2.2% at $2.051 a gallon, ending about 1% lower on the week.

May natural gas NGK19, +0.64%  settled at $2.566 per million British thermal units, up 2.1% for the session, and up 3.1% for the week. The May contract expired at the day's settlement.


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Reporting by Myra P. Saefong from Marketwatch

marketwatch.com 04 26 2019 20:05 GMT

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