Economy

Oil prices slip as demand outlook, trade dispute weigh

August 13, 2019 11:51·
Oil Declines as Trade Tensions Continue to Stoke Demand Fears

Oil Declines as Trade Tensions Continue to Stoke Demand Fears

OPEC members continue to cut production to drain global oil inventories, with the Saudis cutting more than their agreed quota, but analysts said more cuts were needed to support prices due to a fall in demand and non-OPEC supply growth next year.

Mounting signs of an economic slowdown and a ratcheting up of the U.S.

The price of the key U.S. marker crude, West Texas Intermediate (WTI), fell more than 20% below its 2019 settlement high of $US66.30 hit on April 23, which is bear-market territory.

U.S. West Texas Intermediate (WTI) futures were at $54.29 per barrel, down 21 cents, or 0.4%, from their last close.

Oil prices slipped on Tuesday, offsetting narrow gains in the previous session, as sluggish demand forecasts countered expectations that major producers would prop up oil prices by limiting crude oil output.

The kingdom's plans to float its national oil company Saudi Aramco in what could be the world's largest initial public offering (IPO) give it further impetus to boost prices.

U.S. President Donald Trump said on Friday he was not ready to make a deal with China and even called a September round of trade talks into question.

The official said Saudi Aramco has signed a letter of intent with India's Reliance (RELI.NS) to potentially buy a stake in its refining and petrochemicals business.

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OPEC and its allies, known as OPEC+, have agreed to cut 1.2 million barrels per day (bpd) since January 1.

Germany's Ifo economic institute said its quarterly survey of almost 1,200 experts in more than 110 countries showed that its measures for current conditions and economic expectations have both worsened in the third quarter. OPEC has repeatedly warned that they were drawing the line at $50, promising further supply cuts should the price of oil fall that low.

Crude prices held their gains after oil-field services firm Baker Hughes said the number of United States oil rigs fell again for another week - down by six to 764.

Iranian Foreign Minister Javad Zarif said the launch of a US maritime security mission in the Persian Gulf has turned the region into "a matchbox ready to ignite because America and its allies are flooding it with weapons".

Overall, global factors such as the ongoing trade war as well as growing American surpluses are outweighing rising geopolitical tensions in the Strait of Hormuz, which is a critical transit route in the Gulf where a significant portion of the world's oil output comes from. The U.S. security mission began after explosions damaged six tankers in May and June, and Iran seized a British-flagged tanker the following month.

It was not a positive start, however, for oil futures this morning, as prices dropped on concerns that a prolonged U.S.

Gloomy forecasts for the global economy and oil demand growth have also dragged on oil prices as the trade dispute between the United States and China escalates.

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