U.S. crude oil prices plunged to end sharply lower on Friday, amid speculation global supplies will continue to outpace demand and Goldman Sachs projecting a steep drop in oil prices in the near future. The better than expected rise in crude stockpile reported by the Energy Information Administration last week also weighed on oil prices.
For the week, crude oil prices dropped about 3.1 percent.
Earlier today, Goldman Sachs lowered its price forecast for crude oil, while cautioning that surplus crude supplies could send prices spiraling downward to as low as $20 a barrel in the near future.
Goldman Sachs slashed its price target for U.S. crude for 2016 to $45 from a previous forecast of $57. The analyst also cut its Brent oil price target for 2016 to $49.50 a barrel, from an earlier forecast of $62.
OPEC is pumping far more oil than it needs to in order to keep prices low and drive away competition from the U.S. and Canada.
Oil came under additional pressure after reports indicated Saudi Arabia not to be in favor of an emergency meet of the Organization of the Petroleum Exporting Countries to stem crude prices steep fall. A drop in U.S. refinery activity has also added to the woes.
The IEA says non-OPEC producers will carry out their deepest production cuts in more than two decades next year. But OPEC will more than pick up the slack, it warns.
Meanwhile, oil services firm, Baker Hughes Inc. in its weekly rig count on Friday said U.S. oil rigs actively drilling for oil dropped by 16 units to 848 rigs as on September 11.
In some mixed economic news, a Labor Department report on Thursday showed U.S. producer prices for August to have come in flat, with a drop in energy prices offset by continued increase in service prices.
Meanwhile, consumer sentiment in the U.S. deteriorated significantly early September, a preliminary report from the University of Michigan showed.
Light Sweet Crude Oil futures for October delivery, the most actively traded contract, tumbled $1.29 or 2.8 percent, to settle at $44.63 a barrel on the New York Mercantile Exchange Friday.
Crude prices for October delivery scaled a high of $45.88 a barrel intraday and a low of $44.16.
On Thursday, crude oil surged $1.77 or 4 percent, to settle at $45.92, after an official weekly oil report from the Energy Information Administration showed crude stockpiles in the U.S. to have increased more than expected last week.
The U.S. Energy Information Administration on Wednesday reported crude stockpiles in the U.S. to have increased 2.6 million barrels in the week ended August 28, while analysts anticipated an increase of 0.3 million barrels. Total U.S. crude stockpiles aggregated 458.0 million barrels end last week.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 95.18 on Friday, down from its previous close of 95.50 in late North American trade on Thursday. The dollar scaled a high of 95.69 intraday and a low of 95.14.
The euro trended higher against the dollar at 1.1338 on Friday, as compared to its previous close of 1.1280 in North American trade late Thursday. The euro scaled a high of 1.1351 intraday and a low of 1.1255.
On the economic front, a Labor Department report on Thursday showed U.S. producer prices to have come in flat in August, with the index for final demand unchanged in August after rising by 0.2 percent in July. Economists expected the index to edge down by 0.1 percent.
Consumer sentiment in the U.S. deteriorated significantly, with the index tumbling to 85.7 in September from the final August reading of 91.9, a preliminary report from the University of Michigan showed. Economists expected the index to decline modestly to 91.0.
German consumer price inflation remained stable as initially estimated in August, final data from Destatis showed Friday. The consumer price index rose 0.2 percent year-on-year, the same as in July. The rate matched the preliminary estimate published on August 28. The measure climbed for a seventh month running.
Germany’s wholesale prices declined at a faster pace in August, figures from Destatis showed Friday. Wholesale prices dropped 1.1 percent year-over-year in August, following a 0.5 percent stable rate of decrease in the previous month. The wholesale price index has been falling since July 2013.
The French current account balance turned to deficit in July largely due to the decline in surplus on services, the Bank of France showed Friday. The current account deficit totaled EUR 0.4 billion in July compared to a surplus of EUR 0.8 billion in June.
U.K. construction output decreased unexpectedly in July after recovering in the previous month, figures from the Office for National Statistics showed Friday. The volume of construction output fell a seasonally adjusted 1.0 percent month-over-month in July, reversing a 0.9 percent increase in June. Economists had expected a 0.5 percent climb for the month.
Japan’s business survey index of large manufacturers turned positive in the three months ended September, while future situation is expected to weaken, a quarterly survey by the Ministry of Finance and the Cabinet office showed Friday. The Business Survey Index turned to a positive reading of 11.0 in the three-month period to September from -6.0 in the previous three months.
The material has been provided by InstaForex Company – www.instaforex.com