Oil prices fall on worries fuel demand to stall amid slowing global growth

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  • Both Brent and U.S. crude futures slipped from their last settlement.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices declined on Thursday amid lingering concerns over slowing global economic growth that may limit fuel demand and after a surprise build in U.S. crude inventories.

International Brent crude oil futures were at $60.89 a barrel at 0352 GMT, down 25 cents, or 0.4 percent, from their last settlement, having closed down 0.6 percent in the previous session.

U.S. West Texas Intermediate (WTI) crude futures were at $52.40 per barrel, 22 cents lower from their last settlement.

“Crude oil came under further pressure as concerns of faltering global growth remained at the forefront in investor’s minds,” ANZ Bank said.

The prospects of future oil demand are getting clouded by the global growth worries, analysts said.

“With the IMF downgrading 2019/20 and the continued rhetoric from Davos reiterating that they expect global growth to slow down over the next two years, is providing selling pressure in oil,” said Hue Frame, portfolio manager at Frame Funds in Sydney.

Earlier this week, the International Monetary Fund (IMF) cut its world economic growth forecasts for 2019 and 2020, due to weakness in Europe and some emerging markets.

Meanwhile, world leaders and top executives are meeting in Davos, Switzerland, this week to discuss how to steer policy amid worries of slowing economic growth, damaging trade wars and Brexit.

Oil market sentiment was also weakened by an increase in U.S. crude inventories after refineries cut output, data from industry group the American Petroleum Institute showed on Wednesday.

Crude inventories rose by 6.6 million barrels in the week ended Jan. 18 to 443.6 million, compared with analysts’ expectations for a decrease of 42,000 barrels, the API said. Refinery runs fell by 152,000 barrels per day.

“Sharp production cuts by OPEC+ have kept crude oil futures supported however as market reports indicate for a marked output reduction in Dec 2018,” said Benjamin Lu, analyst at Phillip Futures.

“Though oil prices have demonstrated for higher upside potential in the first quarter of 2019, mounting economic challenges will continue to impede exponential gains in the longer term,” Lu added.

Oil dips as IMF lowers global growth outlook; eyes on US hurricane

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  • The International Monetary Fund downgraded its global economic growth forecasts for 2018 and 2019 on Tuesday.
  • Meanwhile, Hurricane Michael caused the shutdown of nearly 40 percent of U.S. Gulf of Mexico crude output.

Oil prices edged lower on Wednesday after the IMF lowered its global growth forecasts but prices were supported as Hurricane Michael churned towards Florida, causing the shutdown of nearly 40 percent of U.S. Gulf of Mexico crude output.

Brent crude futures were down 21 cents at $84.79 a barrel by 0434 GMT, after a 1.3 percent gain on Tuesday.

U.S. West Texas Intermediate (WTI) crude was down by 34 cents, or 0.5 percent, at $74.62 a barrel, after rising nearly 1 percent in the previous session.

The International Monetary Fund downgraded its global economic growth forecasts for 2018 and 2019 on Tuesday, raising concerns that demand for oil products may slump as well.

Trade tensions and rising import tariffs were taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows, the IMF said.

“Prices are peaking at the most opportunistic time given waning global growth narrative,” said Stephen Innes, head of trading APAC at OANDA in Singapore.

In the United States, nearly 40 percent of daily crude oil production was lost from offshore U.S. Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.

Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday on the Florida Panhandle.

The country’s largest privately owned crude terminal, the Louisiana Offshore Oil Port LLC, said late on Tuesday it had halted operations at its marine terminal.

The facility is the only U.S. port able to fully load and unload tankers with a capacity of 2 million barrels of oil.

Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.

Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4.

Industry and government data on U.S. crude inventories will be delayed by one day this week because of a public holiday on Monday. The American Petroleum Institute is due to release data on Wednesday, while the U.S. Energy Information Administration is due to publish on Thursday.

“There seems to more positive supply chatter in the equation this week, and even although we know its maintenance season the markets are so long positioned that we could see an outsized move on a big build,” Innes said.