HOUSTON, Aug. 3 (Xinhua) -- Oil prices decreased for the week ending Aug. 2 after an escalation of the trade tension sent oil prices plunging on Thursday, with the price of West Texas Intermediate (WTI) for September delivery down 0.96 percent and Brent crude oil for October delivery down 2.47 percent.
WTI closed the week at 55.66 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 61.89 dollars a barrel on the London ICE Futures Exchange. WTI and Brent crude have increased 22.57 percent and 15.04 percent, respectively, so far this year.
During the week, WTI and Brent crude moved in the same directions, with four-day gains due to the move of Federal Reserve cutting interest rates and a larger-than-expected drop in U.S. crude inventories.
Oil prices fell sharply on Thursday as a slew of downbeat data and lingering concerns over global trade added fears of economic slowdown, which would potentially weaken energy demand. The WTI decreased by 4.63 dollars, or 7.9 percent, to settle at 53.95 dollars a barrel, the largest front-month contract percentage decline since Feb. 4, 2015 and the lowest settlement since June 19 of this year. Meanwhile, the international benchmark Brent crude decreased by 4.55 dollars, or 6.99 percent, to close at 60.50 dollars a barrel, the sharpest one-day decline in more than three years.
During the week, oil prices increased from Monday to Wednesday as market participants were expecting the Federal Reserve's upcoming decision on interest rates, and the interest rates cut announced on Wednesday continued to push the prices up.
U.S. Federal Reserve on Wednesday lowered interest rates for the first time since the 2008 global financial crisis, amid rising concerns over trade tensions, a slowing global economy and muted inflation pressures.
The Federal Open Market Committee, the Fed's rate-setting body, trimmed the target for the federal funds rate by 25 basis points to a range of 2 percent to 2.25 percent after concluding its two-day policy meeting, in line with market expectation.
"Concerns about demand have moved into the background, at least temporarily," due to the rate cut decision, "so market participants are instead focusing more on the rather tight supply at present again," noted analysts at Commerzbank.
The WTI climbed 0.67 dollar, 1.18 dollars and 0.53 dollar from Monday to Wednesday to settle at 56.87 dollars, 58.05 dollars and 58.58 dollars, respectively, while the Brent crude gained 0.25 dollar, 1.01 dollars and 0.45 dollar to close at 63.71 dollars, 64.72 dollars and 65.17 dollars, respectively.
Moreover, a larger-than-expected drop in U.S. crude inventories provided support to oil prices. In the week ending July 26, U.S. commercial crude oil inventories decreased by 8.496 million barrels from the previous week, larger than expected drop of 2.588 million barrels, implying greater demand and bullish for crude prices.
Oil prices gained on Friday, recovering some of the massive losses in the previous session. The WTI rose 1.71 dollars to settle at 55.66 dollars a barrel, while Brent crude climbed 1.39 dollars to close at 61.89 dollars a barrel.
Oil prices have kept gaining momentum since the start of the year due to some geopolitical concerns and OPEC's decision of production cut. The momentum has slowed down recently, mainly because of the concerns over downturn in demand for crude oil. Furthermore, the prolonged trade worries reignited concerns over weakening demand for oil.
The slowing global economy continued to be a major headwind for crude oil. The slower economic growth of the world will lead to less demand for oil, which in turn would put downward pressure on oil prices.
Moreover, a rising U.S. dollar in the past months has dragged down the greenback-denominated crude futures, as the U.S. Dollar Index has been keeping uptrend since mid-2018. The index managed to stand at 98.10 level for the week ending July 26, although it closed lower, retracing down from the 2019 high as the market expected that the Federal Reserve might cut rates again in September.
Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.