Oil drops 1 pct as economic outlook weakens, US supply surges

With surging US oil supply also unsettling markets, Brent crude futures fell 56 cents, 0.8 percent, to settle at $65.74 a barrel. (Reuters/File Photo)
Updated 09 March 2019

Oil drops 1 pct as economic outlook weakens, US supply surges

NEW YORK: Oil prices fell about 1 percent on Friday after disappointing US job growth revived concerns about a slowing global economy and weaker demand for oil.
With surging US oil supply also unsettling markets, Brent crude futures fell 56 cents, 0.8 percent, to settle at $65.74 a barrel. The international benchmark gained 1 percent for the week.
US West Texas Intermediate (WTI) crude futures fell 59 cents, or 1 percent, to settle at $56.07 a barrel. WTI rose 0.5 percent for the week.
US job growth almost stalled in February, with the economy creating only 20,000 jobs amid a contraction in payrolls in construction and several other sectors. The report dragged down US stock markets, along with oil futures.
Financial markets also took a hit after comments on Thursday from European Central Bank President Mario Draghi, saying the European economy was in “a period of continued weakness.”
“If we see equity markets continue to sink, it will eventually drag energy prices lower with it,” Brian LaRose, a technical analyst at United-ICAP.
The European and US economic weakness comes as growth in Asia is also slowing.
China’s dollar-denominated February exports fell 21 percent from a year earlier, representing the biggest drop in three years and far worse than analysts had expected, while imports dropped 5.2 percent.
“We’ve witnessed this week a rekindling of worries about demand growth,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
So far oil demand has held up, especially in China, where imports of crude remain above 10 million barrels per day (bpd). Yet a slowdown in economic growth could eventually dent fuel consumption and pressure prices.
On the supply side, oil has received support this year from output cuts led by the Organization of the Petroleum Exporting Countries. Saudi Arabia’s crude oil production in February fell to 10.136 million barrels per day (bpd), a Saudi industry source told Reuters.
US sanctions against the oil industries of OPEC members Iran and Venezuela have also supported futures.
But the United States is giving individuals and entities more time to wind down certain financial contracts or other agreements related to Venezuela’s state-owned oil company, the US Treasury Department’s Office of Foreign Assets Control (OFAC) said.
Meanwhile, US crude production has increased by more than 2 million bpd since early 2018 to 12.1 million bpd, making America the world’s biggest producer.
Investment bank Jefferies said US output growth was largely being fueled by onshore shale production, which had recently benefited from investments by Exxon Mobil and Chevron.
However, US energy firms this week cut the number of oil rigs operating for a third week in a row to the lowest level in 10 months, General Electric Co’s Baker Hughes energy services firm said on Friday.


Africa development bank says risks to continent’s growth ‘increasing by the day’

Updated 18 August 2019

Africa development bank says risks to continent’s growth ‘increasing by the day’

  • The trade dispute between US and China has roiled global markets and unnerved investors
  • African nations need to boost trade with each other to cushion the impact of external shocks

DAR ES SALAAM: The US-China trade war and uncertainty over Brexit pose risks to Africa’s economic prospects that are “increasing by the day,” the head of the African Development Bank (AfDB) told Reuters.
The trade dispute between the world’s two largest economies has roiled global markets and unnerved investors as it stretches into its second year with no end in sight.
Britain, meanwhile, appears to be on course to leave the European Union on Oct. 31 without a transition deal, which economists fear could severely disrupt trade flows.
Akinwumi Adesina, president of the AfDB, said the bank could review its economic growth projection for Africa — of 4 percent in 2019 and 4.1 percent in 2020 — if global external shocks accelerate.
“We normally revise this depending on global external shocks that could slowdown global growth and these issues are increasing by the day,” Adesina told Reuters late on Saturday on the sidelines of the Southern African Development Community meeting in Tanzania’s commercial capital Dar es Salaam.
“You have Brexit, you also have the recent challenges between Pakistan and India that have flared off there, plus you have the trade war between the United States and China. All these things can combine to slow global growth, with implications for African countries.”
The bank chief said African nations need to boost trade with each other and add value to agricultural produce to cushion the impact of external shocks.
“I think the trade war has significantly impacted economic growth prospects in China and therefore import demand from China has fallen significantly and so demand for products and raw materials from Africa will only fall even further,” he said.
“It will also have another effect with regard to China’s own outward-bound investments on the continent,” he added, saying these could also affect official development assistance.
Adesina said a continental free-trade zone launched last month, the African Continental Free Trade Area, could help speed up economic growth and development, but African nations needed to remove non-tariff barriers to boost trade.
“The countries that have always been facing lower volatilities have always been the ones that do a lot more in terms of regional trade and do not rely on exports of raw materials,” Adesina said.
“The challenges cannot be solved unless all the barriers come down. Free mobility of labor, free mobility of capital and free mobility of people.”