Oil prices edge down as global growth worries threaten demand

CNBC

  • Both Brent and U.S. crude futures slipped.
  • The International Monetary Fund trimmed its global growth forecasts on Monday.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices edged lower on Tuesday as concerns over global economic growth stoked fears over future demand.

International Brent crude oil futures were down 10 cents, or 0.2 percent, at $62.64 by 0106 GMT. They closed down 0.1 percent on Monday.

U.S. West Texas Intermediate (WTI) crude futures were at $53.70 per barrel, down 0.1 percent, or 4 cents.

“Trade war concerns have reduced global growth expectations and with it comes a lower demand for energy,” said Alfonso Esparza, senior analyst, OANDA.

The International Monetary Fund trimmed its global growth forecasts on Monday and a survey showed increasing pessimism among business chiefs, highlighting the challenges facing policymakers as they tackle an array of actual or potential crises, from the U.S.-China trade war to Brexit.

Also clouding the outlook was data showing a slowdown in growth in China, the world’s second biggest economy.

However, oil prices were offered some support in the wake of recent data that indicated major exporters were beginning to curtail production.

In the United States, energy services firm Baker Hughes said that energy companies cut the number of rigs drilling for oil by 21 last week, the biggest decline in three years and taking the count down to the lowest since May, 2018 at 852.

The Organization of the Petroleum Exporting Countries (OPEC)on Friday published a list of oil output cuts by its members and other major producers for the six months to June, an effort to boost confidence in a move designed to avoid a supply glut in 2019.

Oil firms as China’s economic slowdown was not as big as some expected

CNBC

  • Both Brent and U.S. crude futures saw gains.
  • In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and down from a revised 6.8 percent in 2017, official data showed on Monday.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices firmed on Monday after data showed China’s economic slowdown was not as big as some analysts had expected, with supply cuts led by the Organization of the Petroleum Exporting Countries also offering support.

International Brent crude oil futures were at $62.83 per barrel at 0259, up 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $53.92 a barrel, up 12 cents, or 0.2 percent.

Both oil price benchmarks had dipped into the red earlier in the session on fears that China’s 2018 economic growth figures would be weaker.

In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and down from a revised 6.8 percent in 2017, official data showed on Monday. China’s September-December 2018 growth was at 6.4 percent, down from 6.5 percent in the previous quarter.

Although the slowdown was in line with expectations and not as sharp as some analysts had expected, the cooling of the world’s number two economy casts a shadow over global growth.

“The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting U.S. mortgage applications), faster China easing (China credit growth stabilizing) and a more durable U.S.-China truce,” U.S. bank J.P. Morgan said in a note.

Despite this, analysts said supply cuts led by OPEC would likely support crude oil prices.

“Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower U.S. output growth,” J.P. Morgan said.

It recommended investors should “stay long” crude oil.

Researchers at Bernstein Energy said the supply cuts led by OPEC “will move the market back into supply deficit” for most of 2019 and that “this should allow oil prices to rise to U.S. $70 per barrel before year-end from current levels of U.S.$60 per barrel.”

In the United States, energy firms cut 21 oil rigs in the week to Jan. 18, taking the total count down to 852, the lowest since May 2018, energy services firm Baker Hughes said in a weekly report on Friday.

It was biggest decline since February 2016, as drillers reacted to the 40 percent plunge in U.S. crude prices late last year.

However, U.S. crude oil production still rose by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd.

With the rig count stalling, last year’s growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Record U.S. crude production weighs on oil prices

CNBC

  • Oil prices dipped on Thursday as U.S. crude production quickly approached an unprecedented 12 million barrels per day (bpd) just as worries about weakening demand emerge.
  • U.S. West Texas Intermediate (WTI) crude futures were at $52 per barrel at 0140 GMT, down 31 cents, or 0.6 percent, from their last settlement.
  • International Brent crude oil futures were down 34 cents, or 0.6 percent, at $60.98 per barrel.

Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Essam Al-Sudani | Reuters
Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Oil prices dipped on Thursday as U.S. crude production quickly approached an unprecedented 12 million barrels per day (bpd) just as worries about weakening demand emerge.

U.S. West Texas Intermediate (WTI) crude futures were at $52 per barrel at 0140 GMT, down 31 cents, or 0.6 percent, from their last settlement.

International Brent crude oil futures were down 34 cents, or 0.6 percent, at $60.98 per barrel.

American crude oil production reached a record 11.9 million bpd in the week ending Jan. 11, the Energy Information Administration (EIA) said on Wednesday, up from 11.7 million bpd last week, which was already the highest national output in the world.

U.S. output has soared by 2.4 million bpd since January 2018, stoking fears of a supply glut.

The EIA also said gasoline stockpiles climbed 7.5 million barrels last week, far exceeding analyst expectations in a Reuters poll for a 2.8 million-barrel gain. At 255.6 million barrels, gasoline stocks were at their highest weekly level since February, 2017.

“While (U.S. crude) inventories fell slightly more than expected, there was a large build in gasoline inventories. This stoked fears of weak demand in the U.S.,” ANZ Bank said in a note.

Distillate stockpiles, which include diesel and heating oil, rose by 3.0 million barrels, versus expectations for a 1.6 million-barrel increase, the EIA data showed.

U.S. exports surge, OPEC cuts

Along with the surge in U.S. crude output, exports from the United States are also rising, hitting a record 3.2 million bpd by the end of last year.

“Crude oil exports from the U.S. have strongly increased during the last few years and the trend is expected to remain positive,” shipping brokerage Banchero Costa said in a note.

Norbert Ruecker, head of commodity research at Swiss Julius Baer, said “the United States is moving forward towards energy independence and is set to become a petroleum net exporter next year thanks to rising shale output”.

Soaring U.S. supply comes amid concerns over stuttering demand-growth due to a global economic slowdown, which some analysts believe will turn into a recession.

To stem a lurking petroleum glut, the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer Russia are leading efforts to cut supply.

This has prevented crude prices from falling much lower despite softening demand and the surge in U.S. output.

Oil torn between economic slowdown concerns, OPEC-led supply cuts

CNBC

  • Oil prices were steady on Wednesday as signs of a global economic slowdown were countered by OPEC-led supply cuts which helped support Brent crude futures above $60 per barrel.
  • International Brent crude oil futures were at $60.66 per barrel at 0444 GMT, 2 cents above their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were flat from their last settlement, at $52.11 a barrel.

Oil operations in the Permian Basin near Midland, Texas

Nick Oxford | Reuters
Oil operations in the Permian Basin near Midland, Texas

Oil prices were steady on Wednesday as signs of a global economic slowdown were countered by OPEC-led supply cuts which helped support Brent crude futures above $60 per barrel.

International Brent crude oil futures were at $60.66 per barrel at 0444 GMT, 2 cents above their last close.

U.S. West Texas Intermediate (WTI) crude futures were flat from their last settlement, at $52.11 a barrel.

“Fundamentals offer no clear price direction,” said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.

Prices were prevented from rising as signs of a global economic slowdown mounted.

China, Asia’s biggest economy, faces rising trade uncertainties this year, a commerce ministry official said on Wednesday, after the government earlier this week reported poor December trade data, with both exports and imports contracting from a year earlier.

In Japan, core machinery orders slowed sharply in November in a sign corporate capital expenditure could lose momentum as a bruising U.S.-China trade war spills into the global economy.

Adding to the trade woes, the U.S. economy is taking a larger-than-expected hit from a partial government shutdown, White House estimates showed on Tuesday, as contractors and even the Coast Guard go without pay and talks to end the impasse seem stalled.

The outlook for the global economy darkened further when British lawmakers on Tuesday overwhelmingly rejected Prime Minister Theresa May’s deal to leave the European Union.

OPEC cuts support crude

Despite this, oil markets are receiving support from supply cuts started late last year by producer group the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producer Russia.

However, surging U.S. crude oil production, which hit a record 11.7 million barrels per day (bpd) late last year, threatens to undermine the OPEC-led efforts.

U.S. crude oil output is expected to rise to a record of more than 12 million bpd this year and to climb to nearly 13 million bpd next year, the U.S. Energy Information Administration said on Tuesday, in its first 2020 forecast.

With so much uncertainty around demand and supply, the outlook for oil markets is unclear.

Oil prices are expected to oscillate close to current levels, according to a large annual survey of energy professionals conducted by Reuters between Jan. 8 and 11, with Brent prices in 2019 expected to average $65 per barrel, unchanged from surveys in 2016, 2017 and 2018.

“The oil market remains amply supplied and prices are set to trade rangebound,” Ruecker said. “Softening demand makes too-high prices short-lived … Similarly, (supply) cuts and slowing shale output make too-low prices short-lived.”

Oil rises 1 percent on supply cuts, but economic slowdown weighs on outlook

CNBC

  • Oil prices rose 1 percent on Tuesday amid supply cuts led by producer club OPEC and Russia, although a darkening economic outlook capped gains.
  • International Brent crude oil futures were at $59.64 per barrel at 0257 GMT, up 65 cents, or 1.1 percent, from their last close.
  • While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the United States hit a record 11.7 million barrels per day late last year.

Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Essam Al-Sudani | Reuters
Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Oil prices rose 1 percent on Tuesday amid supply cuts led by producer club OPEC and Russia, although a darkening economic outlook capped gains.

International Brent crude oil futures were at $59.64 per barrel at 0257 GMT, up 65 cents, or 1.1 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.09 per barrel, up 58 cents, or 1.2 percent.

“The impact of OPEC+ (OPEC and others including Russia) cuts, Iran sanctions and lower month-on-month growth in U.S. production should help to support oil prices from current levels,” U.S. bank J.P. Morgan said in a note.

The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, agreed in late 2018 to cut supply to rein in a global glut.

Meanwhile, the United States last November re-imposed sanctions against Iran’s oil exports. Although Washington granted sanctions waivers to Iran’s biggest oil customers, mostly in Asia, the Middle Eastern country’s exports have plummeted since.

“Iranian exports have already fallen sharply and are likely to remain at around 1.3 million barrels per day (bpd) in 2019, 1.3 million bpd down vs their 1H18 average,” HSBC said in its 2019 oil market outlook.

While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the United States hit a record 11.7 million bpd late last year.

The surging output increasingly allows U.S. oil producers to export crude, including to top importer China.

Three cargoes of U.S. crude are currently heading to China from the U.S.

Gulf Coast, the first departures since late September and a 90-day pause in the two countries’ trade war that began last month.

The tankers are scheduled to arrive at Chinese ports between late January and early March, according to shipbrokers and vessel tracking data.

Looming over oil and financial markets, however, is an economic slowdown.

Tuesday’s oil price increases came after crude futures fell by more than 2 percent the previous session, dragged down by weak Chinese trade data which pointed to a global economic slowdown.

“The outlook for the global economy continues to be highly uncertain,” HSBC said.

The bank said it had cut its average 2019 Brent crude oil price forecast by $16 per barrel, to $64 per barrel, citing surging U.S. production and an “increasingly uncertain demand backdrop”.