By Christian Berthelsen
U.S. oil prices declined to a new six-year low on Friday as
investors bet that a change in Saudi Arabia's leadership was
unlikely to alter the kingdom's policy of continuing to pump crude
despite falling prices.
A rally in the dollar also weighed on prices, and a closely
watched gauge of China's economic activity continued to signal
contraction, even as it showed slight improvement, leading some
investors to fret about lower demand for oil.
The U.S. benchmark ended the day down 72 cents, or 1.6%, at
$45.59 a barrel, a six-year low, after rallying as much as 3% late
Thursday after the announcement of King Abdullah bin Abdulaziz al
Saud's death .
The global Brent benchmark ended the day up 27 cents, or 0.6%,
at $48.79 a barrel, after gaining more than 2% late Thursday.
Both contracts lost ground for the week, with the U.S. one
falling 7.2%, much of that after U.S. oil inventory data on
Thursday showed an unexpected increase of 10.1 million barrels in
the week ended Jan. 16.
Even as oil prices have plummeted more than 55% since last June
amid rising global supplies and weak demand, Saudi Arabia has kept
output steady in a bid to protect its market share rather than cut
production to shore up prices. Traders speculated that stance could
change after King Abdullah's death was announced late Thursday, but
the new king quickly made clear he would maintain existing policy
and keep Saudi Arabia's oil minister, Ali al-Naimi, in place.
Saudi Arabia, the world's largest oil exporter and the
second-largest crude producer after Russia, has set the tone for
policy by the Organization of the Petroleum Exporting Countries,
which failed to agree on a plan to reduce output at its November
meeting and isn't scheduled to meet again until June.
"People quickly assessed the changeover in leadership in Saudi
Arabia right now does not portend any change in their oil policy,"
said Eugene McGillian, senior analyst with brokerage Tradition
Energy in Stamford, Conn.
Meanwhile, the dollar continued to climb Friday, extending a
rally since last spring that has seen it gain 17% against a basket
of global currencies in the ICE Dollar Index. Analysts cited the
dollar's continued gains Friday as a factor in weakening oil
prices; a stronger dollar weighs on oil by making it more expensive
for buyers using foreign currencies.
And in China, the preliminary HSBC China Manufacturing
Purchasing Managers Index rose to 49.8 in January, compared with a
final reading of 49.6 in December, HSBC Holdings PLC said Friday.
Still, the gauge of manufacturing activity remains below 50,
indicating shrinking output. China is the world's second-largest
oil consumer after the U.S., and traders closely watch economic
activity there for signals about demand.
In refined products, gasoline futures for February delivery
gained 1.71 cents, or 1.3%, to settle at $1.3479 a gallon.
February diesel gained 0.88 cent, or 0.5%, to end at $1.6467 a
gallon.
Write to Christian Berthelsen at
christian.berthelsen@wsj.com