Forexpros – Crude oil prices ended the week lower on Friday, as disappointing Chinese economic growth data added to concerns over the global economic outlook, while worries over Spain’s debt woes and comments from Saudi Arabia’s oil minister also weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May settled at USD102.83 a barrel by close of trade on Friday, dipping 0.4% over the week.
Oil futures fell to USD100.67 a barrel on April 10, the lowest since February 14.
Oil prices came under pressure in risk-off trade on Friday after official data showed that the Chinese economy grew at the slowest pace in almost three years in the first quarter, fuelling concerns over a slowdown in the world’s second largest economy.
China’s gross domestic product grew by 8.1% in the three months to March, disappointing expectations for an 8.3% increase, after recording an expansion of 8.9% in the fourth quarter.
Earlier in the week official data showed that China posted an unexpected trade surplus in March, after imports dropped sharply, while consumer price inflation rose by a stronger-than-expected 3.6% in March.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the lingering effects of the euro zone’s debt crisis and the implementation of harsh austerity measures throughout the region.
The cost of insuring Spanish government debt against default rose to an all-time high on Friday, after a report showed that Spain’s banks borrowed a record amount from the European Central Bank in March, underlining concerns about the health of the sector.
Spanish 10-year yields settled the week at 5.97%, after hitting the key 6.0%-level in early trade Friday, the highest since early December. Similar-maturity Italian yields increased to 5.52%, while Portuguese yields climbed to 12.56%.
There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.
The news prompted investors to shun riskier assets, such as stocks and industrial commodities, and flock to the relative safety of the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, strengthened 0.72% on Friday to end the week at 80.04.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Meanwhile, comments from Saudi Arabia’s Oil Minister Ali al-Naimi on Friday saying that there is no shortage in global oil supply further added to the selling pressure.
In a statement, Mr. al-Naimi said that his country was determined to see lower prices, while adding that the Kingdom was producing 10 million barrels per day.
“We are seeing a prolonged period of high oil prices,” al-Naimi said. “We are not happy about it.”
Losses were limited thanks to short covering ahead of weekend talks between Iran and six world powers in Turkey over Tehran’s disputed nuclear program. The six world powers include the five permanent members of the United Nations Security Council – the U.S., the U.K., France, Russia and China, plus Germany.
A breakthrough in the talks could help reduce fears of a military conflict arising in the Persian Gulf region, which would likely lower oil prices. But investors remain wary of betting on declines until discussions begin. The previous round of negotiations ended without agreement in January 2011.
The stand-off between Iran and Western countries has dominated sentiment in the oil market in recent months, pushing up prices from USD75 a barrel in October to as high as USD110 in early March.
But prices have been under pressure since hitting USD110 a barrel in early March as the market is now balancing Saudi assurances that it would make up for any supply shortfalls against the potential risk for the loss of oil from Iran.
Saudi Arabia and Iran are the two largest oil producers and exporters among OPEC members.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery settled at USD121.83 a barrel by close of trade on Friday. The May contract expired at the end Friday’s trading session.
The more actively traded June contract closed the week at USD121.39 a barrel, with the spread between the Brent and the crude contracts standing at USD18.04 a barrel.
In the week ahead, investors will be looking at Monday’s U.S. data on retail sales amid concerns that high fuel costs will hit consumer spending.
In addition Spain is due to auction 10-year government bonds on Thursday. The amount to be offered is to be announced on Monday.
Oil traders will also continue to monitor tensions between Iran and the West and a potential disruption to oil supplies from the region.
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