Oil drops by over one pct as economic outlook weakens

Oil prices dropped by more than one percent on Friday as clouds gathered over the global economy after the European Central Bank (ECB) warned of continued weakness and fresh data showed Chinese exports and imports slumped last month.

With surging U.S. supply also unsettling markets, international benchmark Brent crude futures were at 65.42 U.S. dollars per barrel at 0803 GMT, down 88 cents, or 1.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at 56.03 U.S. dollars per barrel, down 63 cents, or 1.1 percent.

Financial markets, including crude Oil futures, took a hit after ECB President Mario Draghi said on Thursday the European economy was in "a period of continued weakness and pervasive uncertainty". Europe's economic weakness comes as growth in Asia is also slowing down.

So far Oil demand has held up, though, especially in China where imports of crude remain above 10 million barrels per day (bpd). Yet a slowdown in economic growth will at some point likely dent fuel demand, putting pressure prices.

Organization of the Petroleum Exporting Countries (OPEC). /VCG Photo

China's fell 20 percent from a year earlier, the biggest drop in three years, while imports dropped 5.2 percent, official data showed on Friday.

On the supply side, crude Oil has been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC). Together with some non-affiliated producers like Russia, the producer group has pledged to withhold around 1.2 million bpd of supply to tighten markets and prop up prices.

But these efforts are being undermined by soaring U.S. crude Oil production, which has increased by more than two million bpd since early 2018, to an unprecedented 12.1 million bpd. That makes America the world's biggest producer, ahead of Russia and Saudi Arabia.