Concern about global economy pushes oil prices lower

London — Oil prices declined on Friday, with Brent slipping away from the $70 mark reached the previous day, but both main contracts were set for weekly gains due to mounting geopolitical risks.

Brent crude futures dropped 16c to $69.24 a barrel by 8.56am GMT, having touched $70.03 in the previous session, the highest since November 12. US West Texas Intermediate (WTI) crude fell 4c a barrel to $62.06, having hit their highest since November 7 on Wednesday at $62.99.

Brent and WTI are on track for their second and fifth consecutive weeks of gain, respectively.

Weighing on prices are concerns that an economic slowdown could dent fuel consumption. “At the heart of this late retreat in oil prices were lingering trade jitters,” said Stephen Brennock of oil brokerage PVM.

The US and China, the world’s two biggest oil consumers, could be close to ending their trade dispute though some hurdles remain. US President Donald Trump said on Thursday that the two sides were “very close to making a deal”, though the US remains hesitant about lifting $250bn in tariffs that China is seeking to have removed.

“The geopolitics around Libya and Venezuela, alongside the possible reflation of risk appetite on positive US-China trade talks may well pull the market out of its morning doldrums,” Harry Tchilinguirian, global oil strategist at BNP Paribas, told the Reuters Global Oil Forum.

On Thursday, Eastern Libyan commander Khalifa Haftar ordered his troops to march on the capital Tripoli, escalating a conflict with the internationally recognised government. Any potential oil outages in Libya would “noticeably increase the pressure on Saudi Arabia to open up the oil tap again, as it did in the autumn”, Commerzbank said in a note.

Oil cartel Opec and producer allies such as Russia agreed to cut output by 1.2-million barrels per day (bpd) this year to prop up prices.

Venezuela’s deputy foreign minister said on Thursday that he does not rule out that more Russian military personnel may arrive in Venezuela under agreements already concluded between the two countries.

Somewhat undermining the Opec-led effort to prop up the market is surging US oil production, which rose to a record 12.2-million bpd last week, official data showed. As a result, US crude oil stockpiles soared last week, the Energy Information Administration (EIA) said on Wednesday.

Reuters