Oil prices fell about 3 percent on Friday and were set for a second straight week of declines after disappointing U.S. job growth revived concerns about a slowing global economy and weaker demand for oil.
With surging U.S. oil supply also unsettling markets, Brent crude futures fell $1.85, or 2.8 percent, to US$64.45 a barrel by 10:42 a.m. EST (1542 GMT). The international benchmark was on track to fall about 1 percent for the week.
U.S. West Texas Intermediate (WTI) crude futures dropped US$1.75, or 3.1 percent, to US$54.91 a barrel. WTI was set to fall 1.5 percent for the week.
U.S. job growth almost stalled in February, with the economy creating only 20,000 jobs amid a contraction in payrolls in construction and several other sectors. The report dragged down U.S. stock markets, along with oil futures.
“We’ve witnessed this week a rekindling of worries about demand growth,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “The labor report that came out earlier today with such a small number of jobs added has helped keep the market focused on that.”
Financial markets also took a hit after comments on Thursday from European Central Bank President Mario Draghi, saying the European economy was in “a period of continued weakness and pervasive uncertainty.”
The European and U.S. economic weakness comes as growth in Asia is also slowing.
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.
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 could eventually dent fuel consumption and pressure prices.
On the supply side, oil has received support this year from output cuts led by the Organization of the Petroleum Exporting Countries. Saudi Arabia’s crude oil production in February fell to 10.136 million barrels per day (bpd), a Saudi industry source told Reuters.
U.S. sanctions against the oil industries of OPEC members Iran and Venezuela have also supported futures.
But the United States is giving individuals and entities more time to wind down certain financial contracts or other agreements related to Venezuela’s state-owned oil company, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) said.
Meanwhile, U.S. crude production has increased by more than 2 million bpd since early 2018 to 12.1 million bpd, making America the world’s biggest producer.
Investment bank Jefferies said U.S. output growth was largely being fueled by onshore shale production, which had recently benefited from investments by Exxon Mobil and Chevron.
However, the U.S. oil drilling rig count, an indicator of future production, last week fell to the lowest since May. Data for this week will be released after 1 p.m. EST.