Markets

Oil steady but sentiment weak on demand, oversupply concerns

Oil steady but sentiment weak on demand, oversupply concerns

Bank of America Merrill Lynch said this week that "global oil demand growth is running at the weakest rate since 2012" at below 1 million bpd, and that this was "leading the selloff" in oil prices.

It's also worth noting the EIA data that never fails to confound analytical expectations usually comes at a time when experts are fretting over the prospect of a crude inventory tightening, most recently in the form of radically slashed exports from Iran and Venezuela - both countries of which were conspicuously absent in Wednesday's debate of the state of the market.

Meanwhile, weekly USA oil production ticked up to an all-time high 12.4 million bpd, according to a preliminary reading from EIA.

Basically, rising USA production is more than offsetting the strategy from OPEC and its allies, and if we consider the potential negative impact of the trade war on future demand, prices are likely to continue lower until supply and demand reach a balance point.

At Monday's (June 3rd) market closure, UK Crude or Brent crude had rounded off the day 1.2 percent lower at $61.28 per barrel, while US WTI (West Texas Intermediate) crude futures had shed 0.5 percent to settle day at $53.25 per barrel.

Increasing output from low-cost USA producers, debottlenecking in Permian region and the International Maritime Organization's shift in bunker sulfur regulation in 2020 will lead to persistent backwardation, lower oil prices and tighter US crude differentials, the note added.

Brent futures were trading at $61 per barrel at 1:22pm UAE time on Thursday a almost 16 per cent decline over the last three weeks, its worst performance since January.

Trump calls Mexico 'abuser' in tariffs row
Trump and fellow Republicans say something needs to be done to stem the biggest migrant surge on the border in a decade. The U.S. -Mexican talks begin on Monday with a meeting between Mexican Economy Secretary Graciela Marquez and U.S.

Crude oil futures are now around 20% below their 2018 peaks reached in late April.

The OPEC members and allies are set to meet early July to discuss about whether to extend supply curbs or end the programme.

"It's the ideal storm, in a way, of increased supply coupled with perceptions of slowing demand growth", Steeves said.

Meanwhile, Russia and Saudi Arabia's energy ministers, Alexander Novak and Khalid Al-Falih, will chair a trade and economy commission in Moscow on June 10, the Russian Energy Ministry said on Wednesday. "China trade war has added further downside risks to already slowing economies", he said.

Producers are concerned that the economic slowdown will reduce fuel consumption.

By Alex NussbaumWest Texas Intermediate crude entered a bear market and Brent tumbled below $60 after U.S. petroleum inventories ballooned, raising fears of a glut as trade disputes threaten demand.

Despite high price volatility, Goldman Sachs still expected the benchmark prices to likely remain at current levels, considering "an increasingly uncertain macro outlook as well as rising US production and large available core-OPEC spare capacity" that would help offset supply reduction of Iran and Venezuela.


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