Oil Futures Tumble Lower on Friday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures extended lower Friday morning, pressured by a stronger dollar and slowdown in manufacturing activity in the United States and eurozone, while a resolution for the U.S.-China trade dispute remains a key uncertainty for the global economy.

In midmorning trade, Nymex West Texas Intermediate May contract slid $1.16 to trade at $58.82 barrel (bbl), while ICE Brent May futures moved $1.07 down to $66.79, with global benchmark continuing to hold below the $70 mark. Nymex ULSD April contract fell 3.4 cents to $1.9531 gallon, while RBOB April futures lost 1.63 cents to $1.9040 gallon.

Friday morning, both crude benchmarks were weighed down by bearish economic data from the eurozone and the United States, with Germany's manufacturing activity sliding deeper into contraction while slowing in the U.S. sector.

The eurozone Purchasing Managers composite flash index fell to 51.3 in March from 51.9 in February, with Germany's manufacturing sector tumbling to a six-year low this month, as the export led economy continues to suffer from slowing demand in China. U.S. PMI composite flash index for March slowed more-than-expected to 54.3 from 55.8, as both manufacturing and services declined to 52.5 and 54.8, respectively. A reading above 50 indicates growth.

The euro weakened sharply against the U.S. dollar in response to the surveys, falling to a one week low of 1.13105, as the U.S. dollar strengthen 0.29% to 96.63 in midmorning index trading. While U.S. economy continues to outperform counterparts in Europe and China contends with slowing growth, the greenback recovered most of their midweek losses, exerting downward pressure of oil prices, which have an inverse relationship with the U.S. currency.

As global economic growth is showing increasing signs of weakness, a resolution to the U.S.-China trade war that has rained havoc in the markets over the past year remains elusive. At the G20 meeting in December U.S. President Donald Trump and China's President Xi Jinping reached a truce that halted tariff hikes until March 1, but progress in negotiations stalled and many analysts now believe trade frictions could last until the end of the year.

The main sticking point are U.S. requirements to create a mechanism for China's compliance with U.S. demands on intellectual property, giving a non-Chinese institution power over domestic Chinese policy, which Beijing is reluctant to accept. Trump said U.S. tariffs on Chinese imports would remain even after a bilateral agreement is reached for a considerable time to ensure Beijing honors terms, potentially derailing a deal in the near term.

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