WTI Crude prices were up early on Friday but still headed for a seventh consecutive weekly loss—the longest losing streak since 2015—as fears of escalating trade wars and a rout in emerging markets and their weakening currencies amid the Turkish turbulence had investors worried about the possible fallout on global oil demand growth.
At 11:28 a.m. EDT on Friday, WTI Crude was up 0.63 percent at $65.87 and Brent Crude was trading up 0.53 percent at $71.81. Yet, both benchmarks were on course to post another weekly loss, which would be the seventh such week for WTI and the third consecutive weekly loss for Brent Crude.
The ongoing U.S.-China trade row has spillover effects in emerging economies across Asia as a strengthening dollar weakens their local currencies, reducing purchasing power and fuel demand. Escalating trade wars could dampen global economic growth and consequently, oil demand growth, analysts, OPEC, and the International Energy Agency (IEA) warn. The strengthening U.S. dollar both raises the oil-importing countries’ import bills and makes dollar-priced oil more expensive to buy for holders of other currencies.
Emerging markets and their currencies were also stirred this week by the turbulence in Turkey where the local currency, the lira, plunged, affecting stocks, bonds, and currencies in other emerging markets, including in Asia, the fastest-growing oil-importing region in the world. Analysts told the Financial Times that the fear is that the Turkish crisis could spread to other emerging market nations. Related: Would The U.S. Sanction China For Buying Iranian Oil?
The weakening currencies in emerging markets and the U.S.-China trade war further clouded the outlook for global economic growth, and consequently, global oil demand growth, sending oil prices down for the week. The U.S. midweek inventory report also contributed to this week’s overall losses in WTI and Brent. The surprise—and quite significant crude build—in U.S. inventories sent oil prices plummeting on Wednesday.
Yet, analysts think that oil prices won’t drop much lower because the U.S. sanctions on Iran later this year are expected to take some 1 million bpd, and possibly more, out of the oil market, putting a floor under the price of oil.
By Tsvetana Paraskova for Oilprice.com
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