Oil prices fall as excess supply looms amidst global market difficulties

TOKYO (Reuters) – Oil prices fell on Friday and were heading towards a third weekly loss, Saudi Arabia warned against oversupply in a context of declining stocks and global trade darkening outlook for the demand for fuel.

The Brent crude futures price, LCOc1, was down 47 cents, or 0.6%, to $ 76.42 per barrel at 5:19 GMT. The global benchmark is on the way to a weekly loss of more than 4%.

US crude CLc1 fell 60 cents, or 0.9%, to $ 66.73. The US benchmark is set for a 3.5% loss this week.

"The drop of nearly $ 10 per barrel of Brent observed in October is a consequence of global stock sales," said Fitch Solutions in a note.

Stock prices plunged oil markets this week as Wall Street recorded its largest daily drop since 2011, reversing all previous increases.

It also affected energy companies, with the Australian energy index .AXEJ, which tracks the country's leading oil and gas companies, down 10% this week, the biggest drop in three years.

Financial markets have been hit hard by a number of concerns, including the US-China trade war, the collapse of emerging market currencies, rising borrowing costs and bond yields, and rising economic concerns. Italy.

There are also signs of a slowdown in world trade, with container and bulk freight rates falling after rising for most of 2018.

US investment bank Jefferies has stated that "the Brent curve is flirting with the contango, a worrying development that, we expected, is at least partly motivated by managing the liquidation of money in a broader context. of risk transaction ".

Contango describes a market where prices for future deliveries are higher than the spot market, which implies oversupply, as it may make it attractive to oil traders rather than selling it.

Until now, the oil market in 2018 has been dominated by the regression, which implies a tight market because the spot prices are higher than the more distant ones, which encourages the sale of oil rather than the store.

Now, two-month contracts at Brent are virtually flat. <0#LCO:>

(Graph: Brent crude oil futures curve – tmsnrt.rs/2ORnQ3e)

MONITORING?

The governor of Saudi Arabia, OPEC, said Thursday that oil markets could face an oversupply by the end of the year.

"The market in the fourth quarter could evolve into an oversupply situation, as evidenced by the rise in inventories in recent weeks," said Adeeb Al-Aama to Reuters.

Saudi Energy Minister Khalid Al-Falih said an intervention may be needed to reduce oil stocks after increases in recent months.

For the moment, however, the oil markets remain relatively tense, largely because of the sanctions imposed by the United States against Iran's oil exports, as of 4 November.

Washington is pressuring governments around the world to stop importing Iranian oil.

Most of them, including its biggest customer, China, are queuing, forcing Iran to store unsold oil on tankers in hopes of being able to sell the crude a times the sanctions lifted.

(Chart: Iranian crude oil exports – tmsnrt.rs/2RfVf4p)