Crude oil prices fall 1% on fears for global economy

The oil supertanker Grace 1, that was on suspicion of carrying Iranian crude oil to Syria, sits anchored in waters of the British overseas territory of Gibraltar. (Reuters)
Updated 05 July 2019

Crude oil prices fall 1% on fears for global economy

SYDNEY: Crude oil prices fell on Friday as concerns over the outlook for global economic growth outweighed elevated tensions in the Middle East that could disrupt supply routes and send prices higher.
US West Texas Intermediate (WTI) crude futures were down 1.1 percent at $56.72 per barrel by 0310 GMT. There was no settlement price on Thursday because of the Independence Day holiday in the United States.
Front-month Brent crude futures were down 0.1 percent at $63.25 per barrel, after closing down 0.8 percent on Thursday.
Analysts said oil was under pressure because fears over future demand amid trade disputes threatening global economic growth. But losses were checked by commitment to cut production from the world’s largest exporters — including members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a grouping known as OPEC+.
“Global growth remains the main factor holding back crude prices,” said Alfonso Esparza, senior analyst at OANDA. “The OPEC+ deal will keep prices from falling too hard, but there must be an end to trade protectionism to assure the demand for energy products recovers.”
New orders for US factory goods fell for a second straight month in May, government data showed on Wednesday, stoking economic concerns.
The US Energy Information Administration on Wednesday reported a weekly decline of 1.1 million barrels in crude stocks, much smaller than the 5-million-barrel draw reported by the American Petroleum Institute earlier in the week.
That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy.
Countering the downward pressure, ongoing tensions in the Middle East also offered some support.
British Royal Marines seized a giant Iranian oil tanker in Gibraltar on Thursday for trying to take oil to Syria in violation of EU sanctions, a dramatic step that drew Tehran’s fury and could escalate its confrontation with the West.


OECD forecast sees global growth at decade low

Updated 1 min 46 sec ago

OECD forecast sees global growth at decade low

  • Governments failing to get to grips with challenges, outlook says

PARIS: The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said on Thursday in an update of its forecasts.

The world economy is projected to grow by a decade-low 2.9 percent this year and next, the Organization for Economic Cooperation and Development said in its Economic Outlook, trimming its 2020 forecast from an estimate of 3 percent in September.

Offering meagre consolation, the Paris-based policy forum forecast growth would edge up to 3 percent in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained.

A bigger concern, however, is that governments are failing to get to grips with global challenges such as climate change, the digitalization of their economies and the crumbling of the multilateral order that emerged after the fall of Communism.

“It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary or fiscal policy: they are structural,” OECD chief economist Laurence Boone wrote in the report.

Without clear policy direction on these issues, “uncertainty will continue to loom high, damaging growth prospects,” she added.

Among the major economies, US growth was forecast at 2.3 percent this year, trimmed from 2.4 percent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among US trading partners.

With the world’s biggest economy seen growing 2 percent in 2020 and 2021, the OECD said further interest rate cuts would be warranted only if growth turned weaker.

China, which is not an OECD member but is tracked by it, was forecast to grow marginally faster in 2019 than had been expected in September, with growth of 6.2 percent rather than 6.1 percent.

However, the OECD said that China would keep losing momentum, with growth of 5.7 percent expected in 2020 and 5.5 percent in 2021 in the face of trade tensions and a gradual rebalancing of activity away from exports to the domestic economy.

In the euro area, growth was seen at 1.2 percent in 2019 and 1.1 percent in 2020, up both years by 0.1 percentage point on the September forecast. It is seen at 1.2 percent in 2021.

The OECD warned that the relaunch of bond buying at the European Central Bank would have a limited impact if euro area countries did not boost investment.

The outlook for Britain improved marginally from September as the prospect of a no-deal exit from the EU recedes.

British growth was upgraded to 1.2 percent this year from 1 percent previously and was seen at 1 percent in 2020.