Oil futures headed lower on Friday, pulling back after ending higher for the month of February, as traders weighed data showing a drop in OPEC output to its lowest in four years against a backdrop weak U.S. economic data and record domestic production.
Members of the Organization of the Petroleum Exporting Countries pumped 30.68 million barrels a day in February, down 300,000 barrels a day from a month earlier and the lowest since 2015, according to a survey from Reuters released Friday.
“The market has priced in OPEC to extend their production cuts until year end and markets may need a new catalyst to take crude higher,” said Edward Moya, senior market analyst at Oanda.
On Friday, April West Texas Intermediate crude CLJ9, -2.43% fell $1.16, or 2%, to $56.06 a barrel on the New York Mercantile Exchange. The contract was down about 2.1% for the week. Based on the front-month contracts, prices climbed 6.4% for the month of February, according to Dow Jones Market Data.
Global benchmark May Brent LCOK9, -2.14% traded at $65.10, down $1.21, or 1.8%, on ICE Futures Europe. Prices based on the front-month contract were looking at a weekly loss of 3% after rising 6.7% for February.
Weaker-than-expected data on U.S. consumer sentiment and manufacturing, on the heels of a fall in Chinese factory activity to its lowest in three years, also raised worries about energy demand.
Data Friday showed the final reading of the University of Michigan consumer sentiment index faded in February, with a 93.8 reading, below the MarketWatch-compiled economist consensus of 95.6. Meanwhile, American manufacturing grew their businesses in February at the slowest pace since the election of President Donald Trump in November 2016, with the ISM manufacturing survey falling to 54.2 in February from 56.6.
Oil prices took to split paths on Thursday, with U.S. prices extending gains from a weekly drop in domestic crude supplies and global benchmark prices lower on the weaker Chinese economic data, which fed concerns over a demand slowdown. Both benchmarks, however, finished February higher, up a second consecutive month.
Consulting firm JBC Energy said Thursday that crude output from the Organization of the Petroleum Exporting Countries declined by 550,000 barrels a day in February, bringing the oil cartel’s total drop in output since October to 2.2 million barrels a day. That figure is much higher than the 800,000 barrels a day OPEC agreed to cut from October levels.
OPEC, led on a de facto basis by Saudi Arabia, and 10 producers outside the cartel, led by Russia, agreed in December to collectively hold back output by 1.2 million barrels a day for the first half of this year.
What’s more, the U.S. Energy Information Administration on Wednesday reported that U.S. crude supplies unexpectedly dropped by 8.6 million barrels. The decline followed five straight weeks of increases and surprised most market forecasters, who expected an increase in stockpiles. Weekly data more broadly has shown that U.S. crude output has surged above a record 12 million barrels a day. The government expects crude output to average 12.4 million barrels a day this year.
“Oil prices have been volatile this week,” with a large selloff Monday Large sell off on Monday due to U.S. President Donald Trump’s tweet “about OPEC manipulating price,” said Scott Gecas, chief market strategist at Walsh Trading.
“Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Trump tweeted Monday.
“It is very clear that traders are watching headlines with their finger on the button to react to headlines,” said Gecas. And “as the U.S. president continues to increase volatility with every tweet, in my opinion this is what will drive price action until global tensions settle down.”
Among the oil products, April gasoline RBJ9, -1.71% shed 1.7% to $1.723 a gallon and April heating oil HOJ9, -1.94% down 1.8% at $1.992 a gallon.
April natural gas NGJ19, +1.03% rose 1.2% to $2.847 per million British thermal units after ending February only slightly lower. Prices had plunged by 39% over the last three months, marking the largest three-month percentage decline since Sept. 2008, according to Dow Jones Market Data.
The EIA reported Thursday that domestic supplies of natural gas fell by 166 billion cubic feet for the week ended Feb. 22. That was a bit less than the 171 billion cubic foot decline forecast by analysts polled by S&P Global Platts.