Oil prices slip on concerns of looming oversupply, economic downturn

The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to November 9 to 440.7 million. (Reuters)
Updated 15 November 2018
0

Oil prices slip on concerns of looming oversupply, economic downturn

  • Since early October, oil prices have lost around a quarter of their value as supply soars
  • China is the world’s biggest oil importer and the second-largest crude consumer

SINGAPORE: Oil prices slipped on Thursday, weighed down by rising supply going into a market in which consumption is expected to slow down amid a glum economic outlook.
Front-month Brent crude oil futures were trading at $65.88 per barrel at 0441 GMT, down 24 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $55.96 a barrel, down 29 cents, or 0.5 percent.
Since early October, oil prices have lost around a quarter of their value as supply soars just as demand is expected to slow down along with an economic downturn.
“Asian refiners and consumers we speak with are mentioning initial concerns of slowing demand,” said Mike Corley, president of Mercatus Energy Advisers.
US bank Morgan Stanley said in a note on Wednesday that China’s economic “conditions deteriorated materially” in the third quarter of 2018, while analysts at Capital Economics said China’s “near-term economic outlook still remains downbeat.”
China is the world’s biggest oil importer and the second-largest crude consumer.
Meanwhile, data released this week showed economic contraction in industrial powerhouses Japan and Germany in the third quarter.
At the same time, supply has been surging, especially due to a 22 percent rise in US crude oil production this year to a record 11.6 million barrels per day (bpd).
“Producers...have more barrels than they can sell at the moment,” said Mercatus Energy Advisers’ Corley.
As a result, oil inventories are rising. The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to Nov. 9 to 440.7 million, compared with analyst expectations for an increase of 3.2 million barrels.
Fearing a renewed glut like in 2014, when prices crashed under the weight of oversupply, the Organization of the Petroleum Exporting Countries (OPEC) is discussing supply cuts.
To do so successfully, OPEC — under the de-facto leadership of Saudi Arabia — will need Russia on its side, which is not an OPEC member.
A joint effort between OPEC and Russia to withhold supply from 2017 was a major contributor to crude price rises last year and in the first half of 2018.
“Russia and OPEC and Saudi Arabia — they are observing the market. If they see that there is dis-balance between supply and demand, (they) will of course take a joint action to reduce supply,” said Kirill Dmitriev, head of Russian Direct Investment Fund, the country’s sovereign wealth investment body.


US energy secretary meets Saudi counterpart after OPEC cuts

Updated 10 December 2018
0

US energy secretary meets Saudi counterpart after OPEC cuts

RIYADH: Saudi Arabia’s energy minister held talks Monday with US Energy Secretary Rick Perry, after the Kingdom and its allies defied US pressure to cut oil production in a bid to prop up prices.
They discussed the “state of the oil market” and energy cooperation between the two countries during a meeting in eastern Dhahran city, the minister, Khalid Al-Falih, said on Twitter.
Perry tweeted that he discussed the need for “open, free, and fair markets with the Saudis.”
OPEC members and 10 other oil producing nations, including Russia, on Friday agreed to cut output by 1.2 million barrels a day from January in a bid to reverse recent falls in prices.
The decision came even as US President Donald Trump demanded that the cartel boost output in order to push prices down.
But Al-Falih shrugged off the pressure last week, saying “we don’t need permission from anyone to cut” production.
The US “is not in a position to tell us what to do,” he told reporters ahead of Friday’s OPEC meeting in Vienna.
Last week, for the first time in decades, the United States — which is not a member of OPEC — was a net exporter of crude oil and petroleum products.
It was the latest sign of how the shale boom has lifted the US standing on global petroleum markets, prompting talk of “energy dominance” by Trump.
Perry’s visit to Dhahran came as Crown Prince Mohammed bin Salman unveiled state oil giant Aramco’s plan for a new energy megaproject in the area known as the King Salman Energy Park (SPARK).
The energy park is expected to attract an initial investment of $1.6 billion, Aramco said.