The total number of active drilling rigs for oil and gas in the United States slipped this week, according to new data that Baker Hughes published on Friday, following a 2 rig increase in each of the two weeks prior.
At the end of April, crude oil prices settled at the lowest in four years. The immediate reason was a report that Saudi Arabia was fed up with production cuts and was willing to give cheaper oil for a longer go. The other reason: Trump’s tariffs. Ironically, the tariff fear pressuring prices is related to economic growth prospects. Yet cheap oil is a great fuel for economic growth—which is why oil importers are happy. Exporters, not so much.
“The sharp drop in the PMIs likely overstates the impact of tariffs due to negative sentiment effects, but it still suggests that China’s economy is coming under pressure as external demand cools,” Capital Economics analyst Zichun Huang told Reuters. “Although the government is stepping up fiscal support, this is unlikely to fully offset the drag, and we expect the economy to expand just 3.5% this year,” she added.
The Trump administration appears not to be in a rush to close any trade deals with those eager for them. Reuters reported that no deals at all were signed during last week’s IMF-World Bank Spring Meetings, which saw world leaders gather in one place to discuss trade. This suggests extended tariff uncertainty, which means extended oil price uncertainty.
Oil prices may decline further this year as new production swells and demand remains capped by China’s faltering growth, the head of the International Energy Agency said.
While crude futures have recovered over the past two weeks to trade near $68 a barrel on London, they remain roughly 9% below levels traded before President Donald Trump announced a blizzard of tariffs on China and other nations on April 2.
OPEC+’s audacious bid to punish its oil-quota cheats prompted a renewed plunge in crude on Wednesday, as growing tensions with Kazakhstan stoked fears of an escalating price war.
Oil markets have been jittery since early April, when the producers’ group led by Saudi Arabia stunned traders by accelerating the revival in its output. This was an apparent effort to discipline over-producing members by driving down prices, yet Kazakhstan — the greatest offender — has continued to pump as usual at its biggest fields.
Oil rose as the potential for the U.S. to curtail Iranian flows added to a rebound driven by broader markets.
West Texas Intermediate advanced about 2% to settle near $64 a barrel, recouping most of the previous day’s losses, which were driven by U.S. President Donald Trump’s public rebuke of the Federal Reserve.
Russia downgraded its outlook for exports this year and lowered expectations for the price for its oil, developments that may force the government to dip into its wealth fund to cover wartime spending.
The Economy Ministry forecast a 5.3% decline in exports to 410.6 billion rubles ($5 billion), down from an earlier projection of 445 billion rubles, the Interfax news service reported on Monday. The updated macroeconomic outlook also included a lower price for Urals oil of $56 a barrel, versus $69.70 seen earlier.
Whether China will keep this rate of imports going forward is an open question, with U.S. exports of crude to the world’s top importer clearly set to get decimated if not outright sapped. For oil exporters, however, the more pressing issue is how long the tariff war will continue. Alas, this is also an open question at this part, although there is a chance of good news down the road. Until then, there will be some suffering, especially among the less wealthy oil exporters.
West Texas Intermediate futures added 1.9% to settle near $62.50 a barrel, the third gain in the four past sessions, after China signaled openness to trade negotiations with the Trump administration. Pre-conditions for the talks would include a more consistent US position and a willingness to address China’s concerns around American sanctions and Taiwan, according to a person familiar with the Chinese government’s thinking.