World demand for oil slowed by slowing growth – Newspaper

Oil markets are collapsing.

US benchmark West Texas Intermediate (WTI) closed the session on Friday down $ 4.21, or 7.7%, to $ 50.42. It has not been this low for over a year.

On Friday, WTI prices reached their lowest point since mid-October 2017. Brent crude, an international benchmark, also fell 3.66 USD, or 5.9%, to 58.94 USD. This was its lowest level since the end of October 2017.

Prices continued to fall all week. They slipped again after US crude inventories rose to their highest level.

US stocks of commercial crude increased by 4.9 million barrels to 446.91 million barrels last week, the US Energy Information Administration (EIA) said on Wednesday, its highest level since December.

Meanwhile, crude oil production in the United States also hit a record 11.7 Mb / d, reported the US Energy Information Agency (EIA).

According to reports, a larger amount of US crude could also be heading towards the market as the bottlenecks of US pipelines will be eliminated in the second half of 2019. The increase in oil production at United States exceeded the additional crude transportation capacity.

Oil markets also suffered from weak Asian and European markets as markets remain deeply concerned about slowing global growth in the face of rising US interest rates and trade tensions.

All of these have certainly contributed to the current market scenario.

Yet, some Americans seem to have the impression that President Trump's war on the Organization of the Petroleum Exporting Countries (OPEC) and its leader, Saudi Arabia, are producing the desired impact.

President Trump publicly thanked OPEC and even Saudi Arabia for lowering prices. In a tweet from last Wednesday, he said: "Oil prices are falling. Awesome! Like a big tax break for America and the world. Enjoy! $ 54, was just $ 82. Thanks to Saudi Arabia, but let's go lower! "

Trump had a point to prove, pointing out to his national audience, the decision to stand near besieged Prince Mohammad bin Salman, the Saudi Crown Prince, is bearing fruit.

An overabundance has invaded the oil markets. Prices are lower despite pressure on Iranian crude production. Goldman Sachs expects the increased volatility of oil prices to continue at least in the coming weeks. However, the markets are expected to be a little more stable after the Vienna 6 December Opec ministerial meeting.

"It will take a fundamental catalyst for prices to stabilize and eventually trade higher," say Goldman analysts, confirming what many already suspected: there is currently too little and too little wind behind for oil gross.

Opec knows it very well and really worries. It was reported earlier that Saudi Arabia was trying to mobilize support for a reduction in production of 1-1.4 Mb / d.

Indeed, Saudi Arabia announced a reduction in production of 500,000 b / d in December.

But the killing of Khashoggi and its ramifications also haunt the oil markets. A besieged and weakened MBS, for his own survival, desperately needs Trump's support and can not afford to bother him.

The latest news from Saudi Arabia is certainly not too positive for the rough markets. Citing industry sources, Bloomberg reported Thursday that the Kingdom's oil output since the beginning of this month had hit new highs, reaching 10.8-10.9 mbd / d.

In fact, the supply, including the reduction in production and stocks, has even reached 11 mbjd some days. Riyadh also appears to have postponed the announced production cut of 500,000 barrels a day, at least until January 19. Energy Minister Khalid Al-Falih told reporters on Thursday that he was observing weak demand for oil in January and that the kingdom would react accordingly. calm the anxiety of the market.

And this is happening as pessimism about global economic growth as a driver of oil demand continues.

Reuters quoted good and old friend Fatih Birol, world energy guru and current executive director of the International Agency (IEA), according to which geopolitical instability and uncertain economic growth prospects were pushing oil markets in unprecedented uncertainty.

The slowdown in global economic growth is slowing demand. The appetite for oil in the United States has been "very strong," but the IEA warned last week against a "relatively weak" demand in Europe and the developed Asian countries. And the IEA has reported a "slowdown" in demand in India, Brazil and Argentina because of high oil prices, weakening currencies and a deterioration in economic activity .

Any possible failure by Opec at its 6 December ministerial meeting could further derail the markets. But in the circumstances, can Riyad allow himself to take the lead in this direction and annoy Trump? Too big question and with major consequences.

Posted in Dawn, November 25, 2018