Oil prices dropped close to 2 percent on a worsening global economic outlook after the European Central Bank (ECB) warned of continued weakness and fresh data showed Chinese imports and exports slumped last month.
With surging U.S. oil supply also unsettling markets, international benchmark Brent crude futures lost US$1.22, or 1.9 percent, to US$65.08 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were down 96 cents, or 1.7 percent, at US$55.71.
Financial markets, including crude oil futures, took a hit after comments on Thursday from ECB President Mario Draghi, saying the European economy was in “a period of continued weakness and pervasive uncertainty”.
Europe’s economic weakness comes as growth in Asia is also slowing.
So far oil demand has held up, especially in China, where imports of crude remain above 10 million barrels per day (bpd). Yet a slowdown in economic growth is likely to dent fuel demand and pressure prices at some point.
China’s dollar-denominated February exports fell 21 percent from a year earlier, representing the biggest drop in three years and far worse than analysts had expected, while imports dropped 5.2 percent, official data showed on Friday.
On the supply side, crude oil has been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
But these efforts are being undermined by soaring U.S. crude oil production, which has increased by more than 2 million bpd since early 2018 to an unprecedented 12.1 million bpd. That makes America the world’s biggest producer, ahead of Russia and Saudi Arabia.
Investment bank Jefferies on Friday said that U.S. output growth was largely being fueled by onshore shale production, which had recently benefited from investments by oil majors Exxon Mobil and Chevron.
“The majors bring scale, steady capital investment and science to the play,” the U.S. bank said, adding that this could lead to a higher growth trajectory and cap the upside oil prices.
U.S. crude exports have also been chasing records, reaching 3.6 million bpd in February – more than the production of OPEC members such as the United Arab Emirates, Kuwait and Iran.