Crude-oil futures settled lower on a spate of negative news Friday, including word of ample crude supply, discouraging signs for economic growth and revelations of a $2 billon trading loss at J.P. Morgan Chase & Co.
Late Thursday, J.P. Morgan disclosed the loss on an illiquid hedge position--and handed ammunition to reformers who want tighter regulation of financial markets. Such regulation could limit the level of risk allowed in futures markets, such as crude oil.
"J.P. Morgan could definitely be the straw that brings more regulation," said Andy Lebow, analyst at Jefferies & Co.
An end-of-day barrage of selling sent light, sweet crude prices to $96.13 a barrel--down 1%, or 95 cents, on the June contract on the New York Mercantile Exchange. The decline was the seventh out of the last eight sessions.
June Brent crude futures fell 47 cents a barrel, or 0.4%, to $112.26 on the Intercontinental Exchange.
J.P. Morgan's loss was only the latest in a stream of news weighing on market sentiment.
"The bearish fundamentals are just piling up this week," said PFG Best analyst Phil Flynn. "A lot of the reasons we were buying oil before are going away."
Political turmoil in the European Union--with new leadership in France and stalemate over a new Greek government--has stoked fears of further economic slowdown across the Atlantic.
In addition, China released weaker-than-expected trade data, fueling fears of a slowing global economy. China's exports and imports grew by 4.3% and 0.3%, respectively, year-on-year in April, rates much lower than expected. Meanwhile, industrial production in the world's second-largest economy slowed to 9.3% in April, missing expectations of 12.2%.
"The question is whether the China's economic growth is going to help pull the market up," said Tradition Energy broker Gene McGillian. "It's slowing, but that doesn't mean you don't have any growth."
Meanwhile, the International Energy Agency said oil production from the Organization of Petroleum Exporting Countries increased. The IEA pegged OPEC production at 31.8 million barrels a day in April, even as oil stocks in developed countries were above the five-year average in March for the first time since May 2011. The increased production and inventories blunt fears of an oil-supply crunch after Europe starts its embargo of Iran on July 1.
In fact, the IEA said Iranian exports of crude oil fell sharply in April and could be down as much as one million barrels a day this quarter. The IEA also added that global markets should be able to cope with the loss of that Iranian crude.
Members of the International Atomic Energy Agency will meet with Iran early next week over its nuclear program. Any result that would resolve the tensions surrounding Iran and the Middle East would push oil prices down even further, said Rich Ilczyszyn, chief market strategist at iiTrader.com.
No resolution is expected or even foreseen in the near future, but Ilczyszyn added, "If we do get a resolution to Iran, [oil prices] are going to drop another $10."
Reformulated gasoline blendstock futures for June delivery was $3.0008 a gallon, down 0.3%.
June heating oil traded at $2.9636 a gallon, down 0.6%.