Oil prices on ebb tide as gloom gathers over global economy

The anti-government unrest in Iraq could disrupt exports particularly from its Basra terminals. (AFP)
Updated 07 October 2019

Oil prices on ebb tide as gloom gathers over global economy

  • US and Chinese officials meet in Washington in fresh effort to work out a deal
  • Iraq’s oil exports from Basra terminals could be disrupted if instability lasts for weeks

SINGAPORE: Oil prices fell on Monday, extending last week’s heavy losses, with traders fearing the global economic slowdown will weigh on future oil demand growth while pegging hopes for a rebound on progress in talks this week on ending the US-China trade war.
Brent crude futures edged down 28 cents to $58.09 a barrel by 0300 GMT, while US West Texas Intermediate (WTI) crude was at $52.64, down 17 cents.
Both contracts ended last week with a more-than-5 percent decline after dismal manufacturing data from the United States and China, as the lingering row between the world’s top economies hurts global growth and raises the risk of recession.
US and Chinese officials will meet in Washington on Oct. 10-11 in the next, much-anticipated fresh effort to work out a deal.
On the supply side, a faster-than-expected resumption in Saudi Arabia’s production after a Sept. 14 attack on key production facilities also exerted downward pressure on oil prices, although the Middle East remained tense.
“The macro headwinds outweigh supply concerns for oil now, despite tensions in the Middle East and a reduced spare capacity pillow,” said Stephen Innes, Asia Pacific market strategist at AxiCorp.
In Iraq, the second-largest producer among the Organization of the Petroleum Exporting Countries, deadly anti-government unrest is posing the biggest security and political challenge so far to Prime Minister Adel Abdul Mahdi’s year-old government.
Iraq’s oil exports of 3.43 million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group’s practice head for Middle East and North Africa, said in a note.
“Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies (spare capacity),” he said.
“While Saudi oil production is now close to 9.9 million bpd, it is not clear that the capacity is fully operational at 11.3 million bpd and the (attacked) Abqaiq facility has lost a significant part of its redundancy.”
Global supply also faces facility repair and maintenance pressures.
The Buzzard oil field in the British North Sea has been shut for pipe repair work, a spokesman from China’s CNOOC said on Friday. Buzzard is the main contributor to the Forties crude stream, the largest of the five North Sea oil grades that underpin Brent crude futures.
Meanwhile Libya’s National Oil Corporation said on Sunday it will close the Faregh oil field at Zueitina port for scheduled maintenance from Monday until Oct. 14.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.