Oil Futures Retreat on Friday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures settled Friday's session lower, with West Texas Intermediate and Brent slipping from four-month highs, as reports of a manufacturing slump in the Eurozone fuels slowdown worries.

Nymex WTI May contract closed $0.94 lower to trade near $59.04 barrels (bbl), while ICE Brent May futures settled $0.83 down to $67.03, although both benchmarks remain in an uptrend. Spot ULSD April contract tumbled 2.12 cents to $1.9659 gallon, while RBOB April futures moved 0.56 cents higher to $1.9259 a gallon, while gaining 3.7% on the week.

Oil futures ended the session lower amid renewed concerns over the global economy following bearish industrial data from Germany and France, along with slowing growth in the U.S. manufacturing sector. The Eurozone Purchasing Managers composite flash index dipped to 51.3 in March from 51.9 in February, spurred by a sharp slowdown in Germany's PMI to a six-year low this month. In France, manufacturing sector sank into contraction in March, down to 49.8 versus 51.4 expected, as yellow vests protests continue to hammer the French economy. Economic weakness in Germany appears to be external, with Chinese export orders pressured due to trade tensions, tariffs and weaker global growth. The European Central Bank already responded with policy measures by cutting its growth forecasts for Eurozone to 1.1% in 2019, extending sub-zero interest rates and offering new cheap loans to banks.

In the United States, U.S. PMI composite flash index dipped from 55.8 in February to 55.2 this month, a 21-month low, as the gap between manufacturing and sector industries appear to have widened in the first quarter.

Friday's U.S. PMI underscores the uncertainty over the progress in reaching a U.S./China trade deal that has been on rocky ground since February. U.S. President Donald Trump said this week U.S. tariffs on Chinese imports would remain even after a bilateral agreement is reached for a considerable time to ensure Beijing honors terms, a potential sticking point.

Following the slew of bearish economic data, Dow Jones Industrial Average fell 460 points to 25,502.32, while S&P 500 Index lost 1.9% in end of week trading. PMI data out of Germany and France spurred further dollar gains, which advanced 0.164 to 96.151 in index trading. Oil futures were bolstered midweek by a large 9.6 million bbl draw in U.S. commercial crude inventories during the week-ended March 15, leaving the stocks at the lowest level since January at 439.5 million bbl, according to Energy Information Administration. Saudi Arabia, de-facto leader of Organization of the Petroleum Exporting Countries have deliberately cut exports to the United States since Jan. 1 in order to reduce the surplus in U.S. crude stockpiles, which has narrowed a sharp 22.827 million bbl or 67% during the last four weeks.

Last month, Saudi Arabia shipments to U.S. refineries were 1.6 million bbl against 5.75 million bbl a year ago according to Bloomberg data. Friday afternoon, Baker Hughes reported the number of rigs drilling for oil in the United States declined for the fifth consecutive week, down nine to an 824 11-month low. The U.S. oil rig count is down 33 over the most recent five-week period and 61 year-to-date, while up 20 against year ago. Even though the rig count has fallen, U.S. production climbed by more than 1.7 million bpd on the year to a record 12.1 million barrels per day in the week ended March 15, surpassing output by Russia and Saudi Arabia.

Liubov Georges can be reached at liubov.georges@dtn.com