Crude Ends Week Lower After Largest Dip in More Than Four Years

(Bloomberg) -- Oil finished down for the week as positive U.S. jobs news wasn't enough to erase a plunge triggered by President Donald Trump's escalation of the trade war with China.

Futures in New York rebounded 3.2% on Friday, just partly recovering from a 7.9% slump the previous day, the worst one-day selloff in four years. Oil began to regain some ground early in the session as the market came to terms with Trump's threat to impose new tariffs on $300 billion of Chinese goods. It then got a boost from a payrolls report that showed the U.S. jobless rate holding near a half-century low, with average hourly earnings that rose more than forecast.

A trade-war escalation “is not good for oil, but it's probably not quite as bad as we saw yesterday,” said Bill O'Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. “The reaction was a little over the top so you're getting a bit of a recovery today.”

Still, oil declined 1% for the week as comments that the Federal Reserve rate cut might not be followed by another joined with the trade war to boost demand concerns. Oil last month capped its smallest monthly move since 1991 as it continues to be caught between fears the global economy may see a slowdown and concerns crude flows from the Middle East may be disrupted

“Tariffs and the Fed cut, those are two new data points that weren't there at the beginning of the week,,” said Mark Watkins at U.S. Bank Wealth Management. “Right now where the global economy is is the number one factor impacting oil.”

West Texas Intermediate oil for September delivery added $1.71, or 3.2%, to settle at $55.66 a barrel on the New York Mercantile Exchange. Brent for October settlement gained $1.39 to settle at $61.89 a barrel on the ICE Futures Europe Exchange.

See also: Commodities Roiled as Trump Pours Gasoline on Trade War Inferno

America's new import taxes, which Trump said could go “well beyond” 25%, will be imposed on a long list of goods expected to include smartphones and laptop computers. They will come atop a 25% duty already in place on some $250 billion in Chinese goods and mean that almost all trade with Beijing will be subject to new levies. China on Friday pledged “countermeasures.”

Meanwhile, while the U.S. Federal Reserve cut interest rates this week, the bank made it clear the cut was not the start of an extended cycle of monetary-policy easing to protect the economy.

--With assistance from James Thornhill, Alex Nussbaum and Grant Smith.

To contact the reporter on this story: Kiran Dhillon in New York at kdhillon18@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Carlos Caminada, Reg Gale

©2019 Bloomberg L.P.