Oil’s Weekly Drop Highlights Lingering Oversupply Fears

Oil prices were on track for a roughly 2% weekly drop Friday, illustrating how fears of excess supply continue to keep crude prices down even as hopes for coming trade talks boost the outlook for the global economy. U.S. crude futures inched up 0.4% to $55.33 a barrel Friday, stabilizing following three consecutive declines but still heading for a down week as other risky investments rallied on trade hopes. Brent crude, the global price benchmark, added 0.2% to $60.49 a barrel Friday but was also on pace for a weekly decline. Although oil prices have rebounded this year, they are down about 20% in the past year, compared with a nearly 4% climb in U.S. stocks.

Fears that softening demand and steady supply will result in a glut have tamped down crude in recent months. Earlier this week, the Organization of the Petroleum Exporting Countries revised downward its expectations for 2019 global oil-demand growth. The cartel and its allies then put off talk of further output cuts at a technical meeting, a setback to some analysts who think the group needs to lower supply further to mop up excess production. Oil’s separation from other risky assets this week was also notable because crude had moved alongside stocks on sentiment about U.S.-China trade relations recently. Although tensions between the world’s two largest economies have thawed ahead of coming discussions, some analysts remain skeptical that they can get to a far-reaching agreement that removes tariffs and relieves significant pressure on the global economy. That uncertainty is a worry for oil investors trying to gauge whether demand growth will continue slowing down. Meanwhile, the U.S. continues to churn out oil, and a number of other projects are set to add crude to the global market next year. “Though Saudi Arabia has reduced its output more sharply than the production cut agreement stipulates, other member countries such as Nigeria and Iraq as well as Russia, which is a member of OPEC+, have been producing significantly more of late,” Commerzbank analysts said in a note to clients. Elsewhere in commodities Friday, the most-active copper futures surged 1.9% to $2.69 a pound, advancing on optimism that a trade compromise and lower interest rates will support economic activity. The industrial metal is particularly sensitive to expectations for growth in China, which accounts for roughly half of global consumption. Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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