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Oil prices hit by worries of sharp economic slowdown


Oil prices slipped on Monday, with concerns of a sharp economic slowdown overshadowing support from tighter supply due to OPEC’s production cuts and US sanctions on Iran and Venezuela.

Brent crude oil futures were down $0.36, or 0.54%, at $66.67 per barrel at 1200 GMT, while US West Texas Intermediate (WTI) futures were at $58.75 per barrel, down $0.29, or 0.49%.

Both crude oil benchmarks closed down last week after briefly hitting their highest since November 2018.

“Oil remains in a tug of war between fundamentals and a fickle sentiment in global financial markets,” said Vandana Hari of Vanda Insights.

Concerns about a potential US recession emerged on Friday after cautious remarks by the US Federal Reserve caused 10-year treasury yields to slip below the three-month rate for the first time since 2007.

Historically, an inverted yield curve – where long-term rates fall below short-term ones – has signaled an upcoming recession and world stocks hit a 12-day trough on Monday.

Bullish sentiment helped drive benchmarks to last week’s highs, but that move could now leave them vulnerable to a correction.

“Speculators increased their net long in ICE Brent by 15,934 lots over the last reporting week, to leave them with a net long of 308,606 lots … the largest position since late October,” ING said in a note. “A large gross long is a key downside risk for the market, especially with growing concerns over the economy.”

Adding to concerns of a widespread global downturn, the manufacturing output data from Germany, Europe’s biggest economy, shrank for the third straight month, though an improved index on business climate there provided some cheer.

“Estimates for growth and earnings have been revised down materially across all major regions,” said US bank Morgan Stanley.

But BNP Paribas strategist Harry Tchilinguirian told the Reuters Global Oil Forum “oil supply fundamentals remain price-constructive with OPEC+ collectively making good progress on pledged supply cuts while involuntary supply losses in Iran remain sizeable and those in Venezuela continue to mount.”

The Organisation of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, together referred to as OPEC+, have pledged to withhold around 1.2 million barrels per day (bpd) of oil supply this year to prop up markets, with OPEC’s de facto leader, Saudi Arabia, seen to be pushing for a crude price of over $70 per barrel.

Commerzbank noted declines in US crude stocks and expenditure by US shale firms were also providing support. “Oil market-specific reports, which point to tighter supply, are preventing prices from falling any more sharply.”


16 Comments on "Oil prices hit by worries of sharp economic slowdown"

  1. twocats on Tue, 26th Mar 2019 7:34 am 

    supply/demand vs macro economy – ding-ding-ding let’s get ready to RUMMMBLE

  2. Robert Inget on Tue, 26th Mar 2019 8:03 am 

    From IEA:
    Energy consumption worldwide grew by 2.3% in 2018, nearly twice the average rate of growth since 2010, driven by a robust global economy as well as higher heating and cooling needs in some parts of the world.

    The biggest gains came from natural gas, which emerged as the fuel of choice last year, accounting for nearly 45% of the increase in total energy demand. Demand for all fuels rose, with fossil fuels meeting nearly 70% of the growth for the second year running. Renewables grew at double-digit pace, but still not fast enough to meet the increase in demand for electricity around the world.

  3. Davy on Tue, 26th Mar 2019 8:23 am 

    PBP go to here when you want to post a long reference. we want to keep things tiddy:

  4. Sissyfuss on Tue, 26th Mar 2019 8:30 am 

    The only instances of growth in our age of limits is with population and debt. Capitalism works well with plentiful resources and a healthy ecosphere. The debt load of environmental destruction can never be repaid.

  5. print baby print on Tue, 26th Mar 2019 9:48 am 

    Sorry Davy not good in computers technique, actually not interested at all but I will try for the next time thanks

  6. Robert Inget on Tue, 26th Mar 2019 10:46 am 

    Will peak oil consumption hit in 2020?
    If it does, will PeakOil match that peak?

    Stay off fast E. Motorcycles, small E. Aircraft,
    all Teslas, and see.

  7. Antius on Tue, 26th Mar 2019 11:29 am 

    “Will peak oil consumption hit in 2020?
    If it does, will PeakOil match that peak?
    Stay off fast E. Motorcycles, small E. Aircraft, all Teslas, and see.”

    Oil supply and oil demand always match; the only question is, at what price? One complication that we face today that we didn’t face before 2007; is limits to what refiners can afford to pay for oil, which is set by what customers of oil products can afford to pay refiners. Another complication is that not all oils are identical in terms of who can refine them and what they produce in terms of finished products. So declines in heavy sour oil production will not be substituted by an increase in US tight oil production.

    E-vehicles will have little impact on oil demand in 2020. Serious electric aircraft are still concept designs and would have very limited market penetration even when built due to very short range. Private vehicles are only 20% of global oil demand; so even large increases in e-car use would still have only a modest effect on total oil demand, which could easily be swallowed by other sectors. And E-cars have no price advantage over ICE cars; their popularity will only last as long as government subsidies last, which will die when we hit the next recession.

  8. twocats on Tue, 26th Mar 2019 3:33 pm 

    Sissyfuss agree – 2.3% increase in ENERGY consumption is not ROBUST and we will never have much of an idea of how much NET energy is going into society for things we want VS just creating more energy. As EROEI collapses OF COURSE energy demand will go up – energy no longer “grows on trees” – i.e. takes energy to make energy.

    so no – economic conditions are deteriorating and that is keeping price down. OPEC is cutting cutting cutting and that is keeping prices up.

  9. Robert Inget on Tue, 26th Mar 2019 4:18 pm 

    Venezuela really down
    I don’t think really any of this lost crude gets made up, I think Venezuela ships like Libya does in essentially real time so if you take out 3 or 4 million barrels of production for a week, there’s no extra in tanks to sell, that 3 or 4 million comes out of total world stocks.

    Activity halted at Venezuela’s oil port, upgraders after blackout -sources

  10. Davy on Tue, 26th Mar 2019 5:46 pm 

    I demand the nation commit to a national day mourning and issue a national apology to our Dear Leader President Chump. Just because seven members of the Trump White House received criminal indictments doesn’t mean there’s systemic greed and corruption.

    After all, Mueller’s team indicted or got guilty pleas from ONLY 34 people and three companies including six former Trump advisers, 26 Russian nationals, three Russian companies, one California man, and one London-based lawyer. Seven of these people (including five of the six former Trump advisers) have pleaded guilty.

    Those lying liberals act like this is a big deal. Compare this non-event to Clinton’s lies about having sex in the White House. Just imagine the lesson this taught our nation’s youth.

  11. I'm so so depressed JuanPee on Tue, 26th Mar 2019 6:15 pm 

    Posted this using Davy

    Davy on Tue, 26th Mar 2019 5:46 pm

  12. JuanP on Tue, 26th Mar 2019 6:16 pm 

    I’m sailing because I am so so depressed

  13. Davy on Tue, 26th Mar 2019 6:19 pm 

    I’m so obsessed with this JuanP persona that I hardly think about the goat any more.

    Do y’all think that’s normal?

  14. I AM THE MOB on Tue, 26th Mar 2019 11:02 pm 

    Perfectly normal Davy.

  15. I'm so so depressed JuanP on Wed, 27th Mar 2019 4:52 am 

    Posted this using Davy’s name

    Davy on Tue, 26th Mar 2019 6:19 pm

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