Oil prices edge down as global growth worries threaten demand

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  • 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

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  • 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.

Oil slips on economic worries, but still set for strong weekly gain

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  • Both Brent and U.S. crude futures slipped.
  • Despite Friday’s price falls, Brent and WTI are set for weekly gains of more than 7 and 8 percent respectively.

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 slipped on Friday amid concerns over the outlook for the global economy, but output cuts agreed by major exporters underpinned crude prices and kept markets on track for a strong weekly climb.

International Brent crude futures were at $61.55 per barrel at 0333 GMT, down 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures dropped 7 cents, or 0.1 percent, to $52.52 per barrel.

Traders said the declines came on lingering concerns over the health of the global economy.

“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” said Hue Frame, portfolio manager at Frame Funds in Sydney.

Most analysts have downgraded their global economic growth forecasts below 3 percent for 2019, with some even fearing a looming recession amid trade disputes and spiralling debt.

For now, however, there is hope that the trade war between Washington and Beijing may be resolved as global markets, including oil, took heart from talks between the two sides this week.

Despite Friday’s price falls, Brent and WTI are set for weekly gains of more than 7 and 8 percent respectively.

Beyond global economics, oil markets are receiving support from supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at reining in a glut that emerged in the second-half of 2018.

A key reason for the emerging glut was the United States where crude oil production soared by more than 2 million barrels per day (bpd) in 2018 to a record 11.7 million bpd.

Consultancy JBC Energy this week said it was likely that U.S. crude oil production was already “significantly above 12 million bpd” by January 2019.

Given the overall supply and demand balance, Swiss bank Julius Baer said it was “price neutral” in its oil forecast.

“We see the oil market as well balanced into the foreseeable future, as the petro-nations make space for further U.S. shale production growth,” said Norbert Ruecker, head of commodity research at the bank.

Oil falls 1 percent on swelling US supply, concerns on US-China trade talks

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  • Both U.S. and Brent crude futures slipped around 1 percent.
  • Both oil benchmarks had risen around 5 percent the previous day, as financial markets around the world surged on the hopes that Washington and Beijing may soon be able to end their ongoing trade dispute.

Oil refinery and storage Australia

Jason Reed | Reuters

Oil prices fell by about 1 percent on Thursday on swelling U.S. supply and amid a cautious reaction to trade talks between the United States and China, the world’s two largest oil consumers, that finished without concrete details to ending their dispute.

U.S. West Texas Intermediate (WTI) crude oil futures were at $51.80 per barrel at 0432 GMT, down 56 cents, or 1.1 percent, from their last settlement.

International Brent crude futures were down 0.9 percent, or 57 cents, at $60.87 per barrel.

Both oil benchmarks rose by around 5 percent the previous day as financial markets around the world surged on the hopes that Washington and Beijing may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and its possible impact on global growth.

By Thursday, however, the positive feelings ebbed because of a lack of a details on the talks despite a warm statement form China on the outcome, and financial markets took a breather from the rally.

Vandana Hari of consultancy Vanda Insights in Singapore said in a note that oil prices dropped “as optimism fuelled by the U.S.-China trade talks earlier in the week appeared to have run its course and official statements after the conclusion of three days of negotiations, while indicating modest progress, lacked details.”

Meanwhile, U.S. bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 percent on Wednesday, pointing to “weakening economic growth expectations” and rising oil supply from especially from the United States as reasons for their lower price forecast.

Morgan Stanley now expects Brent to average $61 a barrel this year, down from a previous estimate of $69 a barrel, and U.S. crude to average $54 per barrel, against a prior forecast of $60.

The main source of new supply is the United States, where crude oil production remained at a record 11.7 million barrels per day (bpd) in the week ending Jan. 4, the Energy Information Administration (EIA) said on Wednesday.

That has resulted in swelling fuel inventories.

Gasoline stocks rose 8.1 million barrels, to 248.1 million barrels, marking the largest weekly rise since December 2016, the EIA said. Distillate stocks swelled by 10.6 million barrels, to 140.04 million barrels.

Although crude stocks dipped by 1.7 million barrels, to 439.74 million barrels, they remained above their five-year seasonal average of 435 million barrels.

The surge in U.S. crude production runs counter to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut supply aimed at reining an emerging glut.

“Balancing the market would require OPEC discipline to continue well into 2020,” Morgan Stanley said.

Oil prices surge on hopes of successful US-China trade talks

CNBC

  • Both Brent and U.S. crude futures saw gains.
  • Both crude price benchmarks had already gained more than 2 percent in the previous session.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices rose on Wednesday, extending gains from the previous session on hopes that Washington and Beijing can resolve a trade dispute that has triggered a global economic slowdown.

U.S. West Texas Intermediate (WTI) crude oil futures were at $50.29 per barrel as at 0131, up 51 cents, or 1 percent from their last settlement. It was the first time this year that WTI has topped $50 a barrel.

International Brent crude futures were up 42 cents, or 0.7 percent, at $59.14 per barrel.

Both crude price benchmarks had already gained more than 2 percent in the previous session.

“Crude continues to extend gains as early reports from Beijing regarding trade negotiations are fueling optimism around successful trade talks between the U.S. and China,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

“After a dreadful December for risk markets, Crude oil continues to catch a positive vibe,” he added.

The world’s two biggest economies will continue trade talks in Beijing for an unscheduled third day on Wednesday, U.S. officials said, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased U.S. access to China’s markets.

State newspaper China Daily said on Wednesday that Beijing is keen to put an end to its trade dispute with the United States, but that it will not make any “unreasonable concessions” and that any agreement must involve compromise on both sides.

If no deal is reached by March 2, Trump has said he will proceed with raising tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports at a time when China’s economy is slowing significantly.

Oil prices have also been receiving support from supply cuts started at the end of 2018 by a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.

“Crude oil prices continued to march higher, with investors becoming increasingly confident that the OPEC cuts would tighten the market,” ANZ bank said.