(Bloomberg) -- Oil held gains above $58 a barrel after American explorers reduced drilling activity to the least in more than a year as the escalating U.S.-China trade war clouded the demand outlook.
Futures in New York were steady after closing up 1.2% on Friday. Working U.S. rigs fell for the fifth time in six weeks to reach the lowest level since March 2018, according to Baker Hughes data released Friday. As tensions with China simmer, President Donald Trump is in Japan this week to try and hammer out a deal after the White House threatened to raise tariffs on Japanese cars.
Oil posted its biggest loss of the year last week -- including a 5.7% drop on Thursday -- as the intensifying trade war caused investors to reassess their outlook for the global economy. Even before the plunge, money managers had reduced bullish bets on West Texas Intermediate to the lowest in two months. Meanwhile, the situation in the Middle East remained tense but didn’t worsen, taking away a reason for prices to rally.
The market had been “in denial on the impact on global growth from the U.S.-China trade war and we saw that dam burst on Thursday,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Ltd. in Singapore. The impact of the drop in U.S. rigs is likely to be temporary and oil prices will probably stay under pressure this week, he said.
West Texas Intermediate crude for July delivery fell 7 cents, or 0.1%, to $58.56 a barrel on the New York Mercantile Exchange at 10:43 a.m. Singapore time after rising as much as 0.7% earlier. It closed 72 cents higher on Friday, paring its loss for the week to 6.6%.
Brent for July settlement gained 12 cents, or 0.2%, to $68.81 on London’s ICE (NYSE:ICE) Europe Futures after settling 1.4% higher on Friday. The global benchmark crude is trading at a $10.24 premium to WTI.
