(Bloomberg) — Oil prices edged down in choppy trading, with US crude falling to the lowest since May, as weakness in US equities markets added to bearish sentiment about oversupply.
West Texas Intermediate settled below $58 a barrel, the lowest since May, while global benchmark Brent slumped to the weakest in about two months. Diesel futures, which were down about 1.4%, were the biggest drag on the oil complex on Friday, while a selloff in US stocks compounded declines.
Thin trading activity ahead of the Christmas and New Year holidays as well as traders being cautious about deploying risk after a tough year for profits also contributed to choppy trading.
Growing consensus about supplies exceeding demand next year has pushed crude toward the lower end of a band it has traded in since mid-October. And some traders are positioning for further declines as bearish bets on Brent crude reached their highest in seven weeks, according to data released on Friday.
The International Energy Agency on Thursday reiterated its prediction for an unprecedented surplus — although slightly below its forecast last month — and said global inventories have swollen to a four-year high.
Geopolitical tensions may add some support to oil prices. President Donald Trump announced new sanctions on three of Venezuelan counterpart Nicolas Maduro’s nephews as well as six oil tankers, after the US seized a supertanker off the coast of the Latin American nation on Wednesday.
The ship seizure was just the beginning of a new phase in the Trump administration’s ramped-up pressure campaign against the Venezuelan president, according to people familiar with the operation. The act of economic statecraft is designed to deny Maduro a lifeline of oil revenue and force him to relinquish power, the people said.
And a murky outlook for a peace deal to end Russia’s war in Ukraine — which could lower prices by eliminating sanctions on Russian crude — is also helping to support oil.
“Ukraine also seems to keep targeting Russian oil assets even as negotiations for peace are in the works which seems to be keeping a psychological floor in crude,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc.
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–With assistance from Nicholas Lua.
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