Oil Lower in Friday Trade

Oil Lower in Friday Trade

NEW YORK (DTN) -- New York Mercantile Exchange (NYMEX) spot-month oil futures fell Friday morning, down for the third straight day along with continued sell-off in equities following President Donald Trump's tariff announcement and on rising domestic crude oil inventories and production.

On Wall Street, the Dow Jones Industrial Average was more than 300 points lower and the S&P 500 Index down more than 20 points in early trade, adding to the steep losses from a day prior on risk-off trade. Both indices are down 3% this week so far.

The U.S. dollar was lower, reversing down after trading earlier this week to a six-week high.

U.S. markets are under pressure after Trump said Thursday that he plans to impose tariffs of 25% on imported steel and 10% on foreign-made aluminum next week. He reiterated views on the steel tariff in a tweet Friday morning.

In the short term, Trump's tariffs plan spurred risk-off trade in equities and commodities markets, analysts said. In the medium to long term, the move could trigger a trade war with other countries such as China and even allies like Canada and Germany, bolstering inflation.

For the oil industry, such high tariffs could boost prices of construction materials for pipeline and drilling for oil and gas, which would hurt shale producers, said analyst Phil Flynn at Price Futures.

In addition, a policy of protectionism could damage global economic growth and reduce demand for oil, said Andy Lipow, president of Lipow Oil Associates in Houston.

On fundamentals, the Energy Information Administration (EIA) reported midweek that total commercial petroleum inventories rose 3.7 million barrel (bbl) last week, with total crude oil stockpiles 3.0 million bbl higher during the week ended Feb. 23.

"The total U.S. petroleum build was the third in the last five weeks," said Kyle Cooper at IAF Advisors. "Overall, this was considered a rather bearish report."

EIA also reported U.S. crude production increased by 13,000 barrels per day (bpd) last week to a 10.283 million bpd fresh record high. The U.S. is set to become the world's biggest producer this year, surpassing both Saudi Arabia and Russia.

Market attention will be trained on Baker Hughes' weekly oil rig count report due out at 1 p.m. ET.

At 9 a.m. ET, NYMEX April West Texas Intermediate crude futures were 20 cents lower at $60.79 bbl. Intercontinental Exchange May Brent crude futures fell 32 cents to $63.51 bbl. April ULSD futures were down 2.47 cents at $1.8608 gallon. NYMEX April RBOB futures declined 2.23 cents to $1.8741 gallon.

George Orwel can be reached at george.orwel@dtn.com