WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Friday's session lower, with all petroleum contracts notching their fourth consecutive weekly loss amid a one-two punch of a stronger U.S. dollar and the potential return of Kurdish oil exports to the global market after the Iraqi government signaled a breakthrough in an ongoing dispute with their Turkish counterpart.
Friday's rally in the U.S. dollar was, in part, spurred by a weaker-than-expected consumer sentiment index released by the University of Michigan this morning, showing Americans feel less optimistic about the economy than at any point over the past six months. The combination of a softer labor market and standoff in Washington, D.C. over raising the federal debt ceiling renewed worries about the economic outlook. Year-ahead expectations for the economy plummeted 23% from last month, while long-run expectations slid 16%, indicating consumers are concerned that an expected economic downturn will not be brief.
"While current incoming macroeconomic data show no sign of a recession, consumer worries about the economy escalated in May alongside the proliferation of negative news about the economy," said Surveys of Consumer Director Joanne Hsu.
In reaction to the data, the U.S. dollar advanced 0.6% against a basket of foreign currencies to finish Friday's session at 101.873, while pressuring front-month West Texas Intermediate to $70.04 bbl, down $0.83 bbl on the session. International crude benchmark Brent for July delivery declined $0.81 to settle at $74.17 bbl. NYMEX RBOB June futures dropped back $0.0275 to $2.4302 gallon, while ULSD June futures fell $0.0440 to $2.3055 gallon.
Further weighing on the oil complex, the Iraq National Oil Company has officially asked Turkey to restart its pipeline connecting the port of Ceyhan on the Mediterranean coast with the oil-producing region of Kurdistan in northern Iraq, authorities said on Thursday. Ankara stopped receiving oil exports from Kurdistan in March after Paris-based International Chamber of Commerce ruled that Turkey owed Iraq $1.5 billion for receiving unauthorized exports between 2014 and 2018. The oil exports from the Kurdistan Region to Turkey were expected to begin in April following a trilateral deal, but Turkey has not given the green light allowing exports.
The halt of oil flows is threatening the Kurdistan Region's oil sector due to the lack of storage capacity in the region. Norwegian oil company DNO, one of the operators in the region, said on Thursday it will reduce operations in Kurdistan amid uncertainty of the dispute with Turkey.
"Given the uncertain timing of export resumption and, importantly, of payments by the Kurdistan Regional Government for previous oil sales, DNO has scaled back [spending] in Kurdistan, including drilling," the company said in a statement.
The stoppage of Kurdish oil flows has depressed production volumes from the Organization of the Petroleum Exporting Countries last month, according to OPEC's Monthly Oil Market Report. OPEC showed its collective oil production fell by 191,000 bpd in April to 28.6 million bpd just as some of the group's largest producers have started production cuts aimed for May. The drop off in production pressed Iraqi crude production 292,000 bpd below its voluntary quota established in October 2022, and 81,000 bpd less than its quota that took effect this month.