Oil prices rose early on Friday, recovering from Thursday's plunge that sent both WTI and Brent to their lowest levels in nearly two months, but prices are still poised to record the largest weekly decline of 2019 as rising U.S. crude inventories and fears of an economic slowdown have overshadowed signs of tightening global supply in recent days.
As of 08:52 a.m. EDT on Friday, WTI Crude was up 1.23 percent at $58.62, while Brent Crude was trading up 1.37 percent at $67.41.
Prices recouped on Friday some of the hefty losses from the previous day, when both benchmarks plunged in their worst one-day drop in six months. The oil and stock markets were hard hit on Thursday by the increased tension in the U.S.-China trade war, which has investors increasingly worried about the state of the global economy and, by extension, the outlook for global oil demand growth for the rest of the year. Oil prices were battered by the clouded outlook on the global economy and oil demand, on top of Wednesday's bearish EIA inventory report, which showed a crude oil inventory build of 4.7 million barrels in the week to May 17.
Equity and oil markets were less nervous on Friday, after U.S. President Donald Trump suggested that "it's possible that Huawei even would be included in some kind of a trade deal. If we made a deal, I could imagine Huawei being possibly included in some form of or some part of a trade deal." Related: The Trade War Is Transforming Oil Markets
"Broader macro concerns appear to be the driver behind the sell-off, although breaking through key technical levels brought further selling. Despite the large sell-off in flat price, prompt ICE Brent time spreads strengthened further, highlighting the tightness in the prompt market,"
Warren Patterson, Head of Commodities Strategy at ING, said on Friday, commenting on Thursday's plunge.
If oil prices were to weaken further, they could prompt OPEC and its allies to extend their production cut deal to the second half of 2019, Patterson said. This, however, would be the market sending the wrong signal to OPEC+, because ING believes that the global oil balance will tighten further as we move into the third quarter.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More