HOUSTON, July 22 (Xinhua) -- The oil prices continued their downtrend in the week ending July 20. The West Texas Intermediate (WTI) contract prices for September and Brent contract prices declined by 1.4 percent and 3.0 percent, respectively. At end of the week, WTI settled at 70.46 U.S. dollars and Brent settled at 73.07 dollars.
Oil prices started the week with huge losses. The WTI for September delivery fell 2.95 dollars on Monday, to 68.06 dollars a barrel on the New York Mercantile Exchange. The 4.15 percent drop on Monday was the outcome of the growing bearishness of the market on the news that the U.S. President Donald Trump administration is considering to team up with other Western countries to simultaneously release oil stockpiled for emergencies with aim at reining prices hiking.
Brent crude for September delivery also started the week with huge losses and settled 3.49 dollars lower on ICE Futures Europe on Monday. Analysts attributed 4.63 percent loss to oversupply concerns due increasing output of Saudi Arabia and Libya's regaining its normal output levels.
Furthermore, U.S.-China trade tensions, as well as U.S. dollar index which is a measure of the value of the US dollar relative to a basket of foreign currencies, intensified the oil prices slump on Monday.
Oil is mostly traded in U.S. dollars all over the world and a stronger U.S. dollar pressures the oil demand. U.S. dollar index reached its highest point at 95.65 on Thursday.
Anas Alhajji, an energy economist based in Dallas, U.S. state of Texas, told Xinhua that "the main threat for growth in global demand this summer is the rising U.S. dollar."
On Wednesday, U.S. Energy Information Administration (EIA) reported a surprise 5.8 million barrels of crude build in commercial inventories. The build was due to 11.5 million barrels of higher imports and about 4 million barrels of lower exports for the week ending July 13 compared with the previous weekly report levels.
U.S. net imports that measures its imports deducted by its exports is a very important value for the oil price movements. U.S. net imports increased 2.2 million barrels per day during that week.
Alhajji said, "Unlike the past, U.S. weekly crude oil inventories have become extremely sensitive to U.S. net imports, making short term oil prices more volatile."
EIA also reported on Wednesday that U.S. oil production reached 11 million barrels per day during the week ending July 13 for the first time in the history.
Despite the surprise crude oil build and the record production in the United States, the WTI prices for September delivery rose on Wednesday 1 percent as the market paid close attention on declines in gasoline and distillates inventory levels.
Brent and the WTI prices headed different ways on Thursday. The WTI price increased by 1.02 percent while Brent price declined by 0.44 percent. The analysts attributed the divergence to the increasing output of Saudi Arabia and Libya.
On Friday, Baker Hughes reported that oil rigs count declined by 8 in the week ending July 20. Analyst attributed it to the pipeline bottlenecks and pointed out that the declining rig counts have eased oversupply concerns a little bit.
The price differential between the WTI and Brent contracts of September was less than 3.0 U.S. dollars. Analysts pointed out that the narrow gap between the WTI and Brent prices might impact the U.S. oil exports negatively in the future.
The higher differentials between the two major benchmarks are, the more arbitrage opportunities for traders to pursue. As a result, more U.S. crude oil would be shipped to the Asian market.
In the near future, the market will still be watching very closely the news over the trade tension between the United States and China. The current status of the trade dispute concerns the oil market as the rising Asian oil demand has been the major driver of the oil sector in recent years.
Economists point out that tariffs might increase the inflation and disrupt the economic growth of Asian countries which can create a bearish outlook for the oil sector.
Next week, the markets will also be watching the oil exports from Saudi Arabia. An official of the country has stated that the kingdom' s exports will decline next month.
