Oil Trades Near Four-Month Low Amid OPEC Cuts, Economy Concerns

09 June, 2019, 01:21 | Author: Manuel Hopkins
  • Fed chief Jerome Powell admits that trade tensions have dimmed the growth outlook

Over and above that, US crude production hit new record highs of 12.4 million barrels per day.

Oil prices resumed their slide yesterday, dragged down by a surprise gain in US inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with the Organization of the Petroleum Exporting Countries (OPEC), to withhold supplies.

A deal by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, to reduce output by 1.2 million barrels per day (bpd) runs out at the end of this month.

At 483.3 million barrels, the EIA said, crude oil inventories were some five per cent above the seasonal average.

WTI kept the composure today after Saudi Energy Minister said the oil cartel has already agreed on an extension of the ongoing deal to curb the oil production, although he talked down the likeliness of deeper cuts. Many oil pundits think the USA crude benchmark will be next to break crucial support, falling below $50 by this week.

The move sent WTI sharply falling 3.09 USA dollars, while Brent crude dropping 2.38 dollars the following day, as Mexico is a major supplier of crude oil for the United States with lucrative cross-border energy trade.

Signs of slowing global economic activity have increased in recent months, fueled by trade tensions between the USA and China, the world's two largest energy consumers.

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Brent settled at $61.67 per barrel, gaining $1.04, while West Texas Intermediate settled at $52.59 per barrel, up 91 cents; both benchmarks rallied more than 2 percent in post-settlement trade. U.S. President Donald Trump said on Friday there was a "good chance" the United States would make a trade deal with Mexico, but that if the two countries failed to make an agreement a 5% tariff would be imposed on Mexican imports on Monday.

However, outside OPEC+ supply is increasing not only in the United States.

On Wednesday, WTI and Brent hit their lowest levels since mid-January at $50.60 and $59.45, respectively, after USA crude production hit a new record high and stockpiles hit their highest in almost two years.

"Worries about demand destruction are really driving prices lower", said Gene McGillian, vice president of market research at Tradition Energy.

"We see trade tensions spilling over via direct linkages such as trade, commodities and tourism, and indirect linkages such as tighter financial conditions weakening private sector sentiment and spending", Morgan Stanley said.

The group will set its policy when it meets later this month or in early July.

Though demand for oil is still up on a global level, economic concerns are also growing.

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