Oil prices fall on global growth concerns, US supply glut
Oil fell on Wednesday as a swelling supply glut and signs of an economic slowdown weighed on crude prices a day ahead of an OPEC meeting at which the producer club is expected to decide supply cuts.
International Brent crude oil futures were at $61.16 per barrel at 0757 GMT, down 92 cents, or 1.5 percent, from their last close. US West Texas Intermediate (WTI) crude futures were at $52.40 per barrel, down 85 cents, or 1.6 percent.
Oil prices were pressured by a weekly report from the American Petroleum Institute (API) that said US crude inventories rose by 5.4 million barrels in the week to November 30, to 448 million barrels, in a sign that US oil markets are in a growing glut.
Official US government oil production and inventory data is due later on Wednesday. In the Middle East, Saudi Arabia produced a record 11.3 million barrels per day (bpd) in November, adding to the swelling glut.
Reuters’ technical commodity analyst Wang Tao said WTI could soon test support at $51.75 per barrel, while Brent was threatening to drop below $60 per barrel again soon.
China’s government has warned of increasing economic headwinds and as Japan was expected to report another quarter of GDP contraction.
Observers said this was a sign that US oil markets were in a growing glut. More broadly, the slide in US oil followed a tumble in global stock markets on Tuesday, with investors worried about the threat of a widespread economic slowdown.
Key to the global economic outlook will be whether the US and China can resolve their trade disputes.
Washington and Beijing announced a 90-day truce on Saturday, during which neither side will further increase punitive import tariffs.
In a sign of easing tensions between the world’s two biggest economies, Chinese oil trader Unipec plans to resume US crude shipments to China by March.
This was after the Xi-Trump deal at the G20 meeting reduced the risk of tariffs being imposed on these imports, people with knowledge of the matter said.
US President Donald Trump threatened on Tuesday to place “major tariffs” on Chinese goods imported into the US if his administration didn’t reach a desirable deal with Beijing.
China’s state council on Wednesday issued guidance to support employment as the economy slows, saying the country should pay “high attention” to the impact on employment from increasing economic headwinds.
Bank of America Merrill Lynch said in its 2019 economic outlook, published on Tuesday, that “most major economies are likely to see decelerating activity”.
It, however, added that “a steady stream of monetary and fiscal stimulus measures” was expected to stem the slowdown.
In Asian powerhouse Japan, the economy is expected to have contracted more again in the third quarter, with the slowdown deepening, a poll showed on Wednesday, with Q3 annualised GDP expected to fall by 1.9 percent.
A slowing economy may further undermine oil prices. Bank of America said it expected Brent and WTI prices to average $70 and $59 per barrel, respectively, in 2019.
Brent and WTI have averaged 72.80 dollars and 66.10 dollars per barrel so far this year.
Although Libya has more reserves in Africa, there were 37.2 billion barrels (5.91×109 m3) of proven oil reserves in Nigeria as of 2011.
The reserve ranked Nigeria as the largest oil producer in Africa and the 11th largest in the world, averaging 2.28 million barrels per day (362×103 m3/d) in 2006.
The News Agency of Nigeria reports that much of the successes, about 100 percent rise, recorded in the production was because of an amnesty programme introduced to curb militancy in the South-South region by the late President Umaru Yar’Adua.
President Muhammadu Buhari had built on that legacy with additional incentives to the region, including the opening of a Maritime University in Okerenkoko, Delta State, and the clean up of Ogoni spill in Rivers State.
However, Trump has taken another swipe on Twitter at his French counterpart Emmanuel Macron prompted by Macron’s woes over violent protests against fuel taxes.
“I am glad that my friend @EmmanuelMacron and the protestors in Paris have agreed with the conclusion I reached two years ago,” Trump tweeted late on Tuesday.
“The Paris Agreement is fatally flawed because it raises the price of energy for responsible countries while whitewashing some of the worst polluters,’’ said Trump, referring to a global deal on the environment drafted in Paris in late 2015.
Earlier this week, French Prime Minister Edouard Philippe decided to suspend planned increases to fuel taxes for at least six months.
The suspension was in response to weeks of sometimes violent protests, marking the first major U-turn by Macron’s administration in 18 months in office.