Rising Output, Faltering Economy Hit Oil Prices

chkAs more concerns about the health of the global economy seeped back into the market on Friday, oil futures retreated and were found flirting with eight-month lows once again. NYMEX-traded crude for July delivery gave up 72 cents, or 0.9%, to settle at 84.10 per barrel. In London, Brent crude lost 46 cents, or 0.5%, to close at $99.47 per barrel. The dollar once again weighed on crude as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) closed the week with a modest gain.


Still stinging from comments made by Federal Reserve Chairman Ben Bernanke on Thursday that another round of quantitative easing isn’t imminent, oil traders got back to fretting about the health of global markets. It is widely believed that Spain, the Euro Zone’s fourth-largest economy, will formally request financial assistance for its ailing banks this weekend.


Then there are supply concerns, as in too much supply. OPEC most recently said it was pumping 32.42 million barrels a day of oil, a level not seen since the summer of 2008, and has acknowledged that it is producing more oil than the market needs, the Wall Street Journal reported.


Add to that, the Energy Information Administration said today that the U.S. pumped an average of 6 million barrels per day in the first quarter, hitting that lofty mark for the first time in 14 years. In 2011, the U.S. was not a net importer of oil for the first time in decades and the boom in shale plays such as the Bakken and Eagle Ford is helping reduce U.S. dependence on foreign oil sources. EIA confirmed that U.S. production growth was primarily attributable to North Dakota and Texas.


Speaking of the boom in shale oil production, Phillips 66 (NYSE: PSX), the recently spun-off refining business of ConocoPhillips (NYSE: COP), said today it would buy 2,000 rail cars to transport crude from various shale plays.


U.S. equities closed the week in positive fashion and oil stocks did get in on some of the good cheer. Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) both notched small gains while Chesapeake Energy (NYSE: CHK) surged almost 3% after the company said it will sell $4 billion in midstream assets, including its $2 billion stake in Chesapeake Midstream Partners (NYSE: CHKM). The move is just the latest effort by embattled Chesapeake to reduce its debt load by selling assets. CEO Aubrey McClendon says the company will sell about $14 billion in assets this year.


It was not a good day for emerging markets oil stocks as Ecopetrol (NYSE: EC), Petrobras (NYSE: PBR) and PetroChina (NYSE: PTR) all closed lower.

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