NEW YORK (Reuters) — U.S. crude
settled lower on Friday on reports of a slowing economy in China and
a downward slide in U.S. equities, while Brent saw slight gains on
China's economic growth is expected to slow gradually over the next
two years as the government forges ahead with structural reforms and
seeks to curb elevated debt levels, a Reuters poll showed.
China's economic woes and political problems in Turkey, Argentina
and Ukraine drove U.S. stock markets down, with the S&P 500 on track
to post its worst drop in more over two months.
Also weighing on oil prices were expectations that the U.S. Federal
Reserve will further trim its market-friendly stimulus measures when
it concludes a two-day meeting on Wednesday.
Oil products rose sharply on bitter cold in the United States that
sapped stockpiles of crude and distillates there and drew heating
oil imports from Europe, Russia and Asia.
"The over-arching issue is the emerging market turmoil," said Bill
O'Grady, executive vice president and chief market strategist for
Confluence Investment Management in St. Louis, Missouri. "Contagion
is a pretty significant risk."
Brent crude rebounded from a drop of more than $1.20 to settle 30
cents higher at $107.88,its biggest weekly gain since Dec. 20.
WTI gave back some of its gains from Thursday to settle down 68
cents at $96.64. It settled 59 cents higher on Thursday.
Brent's premium to U.S. oil narrowed to its tightest in more than
two months early in the session, but eased back out by 76 cents to
settle at $11.24 on spread trading.
"The tightening of the spread is going to get sold again," said Paul
Smith, chief risk officer at Mobius Risk Group in Houston. "The
market will start risk-adjusting the spread because we'll get a
bunch of supplies on the market as we head into the refinery
Ultra Low Sulfur Diesel rose for the eighth day to reach its highest
settlement price this year, up 6.09 cents to end the day at $3.1374.
Analysts attribute the spike to sustained cold weather.
"The northern hemisphere weather is supportive of crude and
products," said O'Grady.
Data from Thursday that showed China's factory sector shrank in
January for the first time in six months continued to weigh on oil
prices, suggesting a weak start for the economy in 2014.
With many market participants expecting the Fed to shave its
stimulus by another $10 billion a month next week, investors will
look to less risky assets such as U.S. bonds, expecting interest
rates will begin to rise.
In a bearish move for oil markets, it appears Iran may be coming
closer to exporting more oil. President Hassan Rouhani promised
energy executives Thursday at the World Economic Forum in Davos that
the nation would develop an attractive investment model for oil
contracts by September as part of a drive to lure back Western
But a monthly report from industry group American Petroleum
Institute showed a rise in U.S. demand for petroleum products,
reflecting a continued improvement in domestic manufacturing and the
Demand in December rose 5.8 percent year-on-year to 19.2 million
barrels per day, the API said.
(Additional reporting by Lin Noueihed
in London and Manash Goswami in Singapore; editing by Lisa Von Ahn,
Bernadette Baum and Andrew Hay)