WTI, Brent Pullback on Friday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange slumped Friday afternoon amid heavy selling. West Texas Intermediate posted its biggest daily loss in four months after U.S. President Donald Trump called on Organization of the Petroleum Exporting Countries to lower oil prices.

Nymex June WTI futures settled $1.91 lower at $63.30 per barrel (bbl), 3.2% decline on the session and 1.1% loss on the week, falling from a six-month high this week. ICE June Brent moved a steeper $2.20 lower to finish the session at $72.15 bbl. Nymex May RBOB futures plunged 3.15 cebts to settle at $2.1006 gallon, reversing from the highest settlement since the start of the fourth quarter at $2.1321 gallon. Nymex May ULSD futures settle a steep 4.69 cents lower at $2.0512 gallon, falling from $2.1242 gallon better-than five-month spot high traded at the beginning of the week.

Oil futures tumbled more than 3% on Friday amid reports Trump urged OPEC to halt the rise in fuel prices. White House's decision not to reissue waivers for purchases of Iranian crude sent shockwaves through the oil markets this week, causing the international benchmark to rally above $75 bbl, a six-month high.

Market estimates indicate the range of 1.2 to 1.5 million barrels per day (bpd) of oil will be removed from the global market in the coming months, which adds to 1.5 million bpd shortfall in Iranian exports since the United States' unilateral withdrawal from the nuclear deal with Tehran in May 2018.

Trump Administration was quick to reassure the markets that Gulf allies would fill the void, while Saudi Arabia issued a more measured response, calling for "coordination with other oil producers to ensure adequate supplies are available to consumers, while the global oil market does not go out of balance."

Speculation emerged Saudi Arabia was unlikely to immediately lift production largely because oil prices collapsed after Saudis took similar actions ahead of the renewal of Iranian energy sanctions late last year. According to Oxford Institute of Energy Studies, Saudi Arabia is in better position Friday to replace lost Iranian barrels largely due to the lower levels of production under OPEC+ accord and a comfortable level of 2.2 million bpd in spare capacity.

Brent futures were further lifted midweek on unexpected news refiners in eastern Europe were halting shipments of Russian crude on a key pipeline because of contamination issues effecting 700,000 bpd of oil flow, triggering fears over short supplies in Europe. While the contaminated Russian oil is a bullish development, it only had a limited short-term effect on oil prices, as it was countered by a sizable build in U.S. inventory levels last week. Energy Information Administration reported an unexpected 5.5 million bbl increase in U.S. stockpiles, pushing inventories to more than 18-month high. EIA remained bullish on gasoline supply that dropped by 2.1 million bbl to 225.8 million bbl in the profiled week, holding inventories below the five-year average for a third consecutive week.

The Bureau of Economic Analysis was the latest unexpected development this week, reporting in its first of three estimates Friday morning that U.S. gross domestic product in the first quarter grew at a 3.2% annualized rate, topping expectations by a full 1%, and following a 2.2% growth rate in the fourth quarter, spurring talks that the stronger than expected growth rate could prompt the federal Reserve to hike interest rates.

Looking forward into next week, markets will shift focus to U.S.-China trade talks, as U.S. delegation headed by Robert Lighthizer and Steven Mnuchin travel to Beijing for a key round in trade negotiations. Chinese Vice Premier Liu He will head the negotiations for China and then bring a delegation to Washington for additional talks beginning May 8, the White House said in a statement.

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