HOUSTON, Sept. 7 (Xinhua) -- Oil prices increased for the week ending Sept. 6 as market worries over potential financial volatility were eased by some positive news, with the price of West Texas Intermediate (WTI) for October delivery up 2.58 percent and Brent crude oil for November delivery up 1.84 percent.
WTI closed the week at 56.52 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 61.54 dollars a barrel on the London ICE Futures Exchange.
WTI and Brent crude prices have increased 24.47 percent and 14.39 percent, respectively, so far this year, falling from their peak levels in April when the growth of WTI hit over 40 percent, and Brent crude over 30 percent.
During the week, WTI and Brent crude moved in the same directions. Oil prices continued to be capped by concerns over the slowdown of global economic growth, pessimism driven by a surprise contraction in American manufacturing in August and global trade uncertainty.
Meanwhile, the market was buoyed by the latest positive signals from the U.S. Federal Reserve (Fed) and a drop in U.S. active drilling oil rig count, as well as positive economic data on China.
Oil prices opened the week on Tuesday after the Labor Day holiday. The prices declined after the latest data showed that U.S. manufacturing sector weakened in August amid sagging business confidence, stoking concerns over both the U.S. and global economic growth.
WTI decreased 1.16 dollars to settle at 53.94 dollars a barrel, while Brent crude declined 0.4 dollar to close at 58.26 dollars a barrel.
Oil prices jumped Wednesday as investors' long-time oversupply concerns were eased by a continuing drop in U.S. crude oil inventories and strong performance in China's service sector.
For the week ending Aug. 30, U.S. commercial crude oil inventories sharply fell by 4.771 million barrels from the previous week, more than the expected draw of 2.488 million barrels, implying greater demand and bullish for crude prices.
WTI increased 2.32 dollars to settle at 56.26 dollars a barre, while Brent crude rose 2.44 dollars to close at 60.70 dollars a barrel. The energy sector surged nearly 1.4 percent as of market close, among the best performers of the 11 primary S&P 500 sectors, all of which notched gains on Wednesday.
The oil prices gains continued to extend in the following two days amid some bullish news, including the latest positive signals from the Fed, a consecutive drop in U.S. oil rig count, and optimistic data on China's service sector in August.
Fed Chairman Jerome Powell said Friday that the U.S. central bank will continue to act "as appropriate" to sustain the U.S. economic expansion, which fueled hopes for further rate cuts. In the meantime, the Caixin China General Services PMI, a private survey showed that China's composite business activity growth improves to four-month high in August and total employment increases for the first time since April, thanks to a strong performance in service sector.
Oil prices inched up on Thursday and Friday. WTI increased 0.04 and 0.22 dollar to settle at 56.30 and 56.52 dollars a barrel, respectively, while Brent crude rallied 0.25 and 0.59 dollar to close at 60.95 and 61.54 dollars a barrel, respectively.
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, mainly because of the concerns over downturn in demand for crude 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.
During the week ending Sept. 6, the U.S. Dollar Index finished lower, but still above the 98-level, thanks to the optimistic comments from Fed's Powell. In the previous week, the index broke above the 2019 high as the market traded at its highest level since May 2017.
Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.
In the near future, the market would watch closely the development of trade disputes between China and the United States. Both sides decided to hold another round of trade talk in October. Oil prices experienced a steep drop in early August, when the U.S.-China trade dispute was threatening to escalate into a currency war.
Meanwhile, according to Rystad Energy, an independent energy research and business intelligence company, three essential factors will determine the direction of the oil prices next year: no global recession, continued OPEC production cuts, and the effect of new IMO (International Maritime Organization) 2020 regulations.
Beginning on Jan. 1, 2020, new regulations from the IMO will lower the maximum sulfur content of marine fuel oil used in ocean-going vessels from 3.5 percent to 0.5 percent. According to the U.S. Energy Information Administration (EIA), the change in fuel specification is expected to put upward pressure on diesel margins and crude oil prices in late 2019 and early 2020.
"The introduction of stricter shipping fuel regulations - the so-called IMO 2020 effect - will cause a net positive effect on crude demand growth next year of about 1.0 million bpd (barrels per day) in order to balance the global gas oil market," said Bjornar Tonhaugen, head of oil market research at Rystad Energy.