Oil prices are down on the day but up for the week

London — Oil prices fell on Friday but were on track for strong weekly gains as support from a surprise draw in US inventories and possible action from oil cartel Opec and its allies to trim production further outweighed broader economic concerns.

Brent crude was down 35c at $61.32 by 8.30am GMT but the benchmark was set for a weekly gain of more than 3%. West Texas Intermediate (WTI) crude was down 32c at $55.91 but on track for a gain of about 4% over the week.

The strong weekly rise was underpinned by the surprise decline in US inventories, with total US crude and oil product inventories dropping by about 10-million barrels last week.

Adding further support to prices, officials at Opec said extended supply curbs are an option to offset the weaker demand outlook in 2020.

Saudi Arabia, Opec’s de facto leader, wants to focus first on boosting adherence to the group’s production-reduction pact with Russia and other non-members, an alliance known as Opec+, before committing to more cuts, sources told Reuters.

The shutdown, since October 16, of Britain’s 150,000 bpd Buzzard oilfield and a brief shutdown in the North Sea’s Forties Pipeline System also lent support.

Yet concerns over weakening economic growth remained the fundamental price driver.

“Slowing global activity will see demand drop, so the reality is that oil rallies will be limited,” said Jeffrey Halley, senior market analyst at Oanda. “It won’t take much to pull the rug out from under oil’s feet.”

Economists in a Reuters poll said a steeper decline in global economic growth remains more likely than a synchronised recovery, even as multiple central banks dole out rounds of monetary easing.

Another Reuters poll of economists found that the recent truce in the US-China trade war is not an economic turning point and has done nothing to reduce the risk that the US could slip into recession in the next two years.

“The recent slowdown in US data has resurrected talk of US growth ‘catching down’ to the rest of the world,” RBC Capital Markets said in a note to clients.

There was also more bad news for European powerhouse Germany, with a survey showing employment in the nation’s private sector fell for the first time in six years in October, suggesting that a third-quarter slowdown could stretch into the closing months of the year.

Reuters