Oil prices fall as global demand concerns grow

Cornelia Mascio
Ottobre 22, 2019

Oil prices eased on Monday amid persistent concerns about the global economic outlook and the impact on oil demand, while Russian Federation again missed its target to cut oil output last month.

Global benchmark Brent crude oil futures fell by 10 cents, or 0.2%, to $59.32 a barrel by 0108 GMT.

US crude oil futures were down by 9 cents, or 0.2%, to $53.69.

"Oil markets will likely see a steep surplus on the horizon, despite a potential rebound in growth in 2020, which presents a challenge for oil bulls despite tanker war fears, supply disruptions (both structural and temporary) and boiling geopolitical tensions".

On the supply side, USA crude stockpiles were expected to have increased for the sixth straight week, while distillates and gasoline stocks likely fell in the week to Oct.18, a preliminary Reuters poll showed on Monday. "China trade agreement or deeper OPEC cuts will change the negative status quo, neither of which seem to be forthcoming".

The Organization of the Petroleum Exporting Countries, Russia and other oil producers, an alliance known as OPEC+, agreed in December to cut supply by 1.2 million barrels per day (bpd) from the start of this year.

The Commitment of Traders reports show that hedge funds are increasing their short positions and prices are on the verge of a two-week low as traders weigh the various risks associated with the market, stemming from a global slowdown, (on Friday, China's Gross Domestic Product expanded at a 6% pace in the third quarter, the slowest in 27 years), trade wars, Brexit and the supply side of the equation, with reports that Russian Federation on Sunday said that it failed to comply to its commitments in September to curb production.

Additionally, talks between OPEC members Kuwait and Saudi Arabia to resume oil production from joint fields in the Neutral Zone between the two countries, with capacity of 500,000 barrels per day, could mean more supply returning to the market.

Still, a 9.4% year on year increase in China's refinery throughput for September signalled that petroleum demand from the world's biggest oil importer remained robust.

"This level of crude intake would imply that every province had simultaneously processed close-to-record volumes of crude based on their historical regional reporting", JBC analysts said in a note.

European shares opened slightly higher on Monday and United Kingdom government bond yields rose as investors remained hopeful that Britain would be able to avoid a disorderly exit from the European Union.

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