Oil Declines as Investors Focus on Gloomy Economic Outlook

The global benchmark crude traded at a premium of $5.65 a barrel to WTI for the same month.

Jacquelyn Melinek

16 Oct 2019, 03:52 AM IST

Oil Declines as Investors Focus on Gloomy Economic Outlook

A droplet of petroleum drops from a fuel nozzle at a fuel pump. (Photographer: Andrey Rudakov/Bloomberg)

(Bloomberg) -- Crude fell for a second day amid a weakening global growth outlook and abundant crude supplies in the world’s largest economy.

Futures slid 1.5% in New York on Tuesday. Hopes for a resolution of key issues in the U.S.-China trade dispute are fading, souring prospects for a revival in energy demand. Meanwhile, the International Monetary Fund cut its 2019 global growth forecast for a fifth time.

“There are still U.S.-China trade talks and demand concerns” that are weighing on the market, said Michael Hiley, head of OTC energy trading with LPS Partners.

Aside from the U.S.-China trade war, investors are also focused on supply increases in the U.S. The Energy Information Administration sees crude output at major shale plays across the U.S. rising 58,000 barrels a day to 8.97 million barrels a day in November.

West Texas Intermediate for November delivery fell 78 cents to settle at $52.81 a barrel on the New York Mercantile Exchange.

Brent crude for December settlement inched down 61 cents to end the session at $58.74 a barrel on the London-based ICE Futures Europe Exchange, and traded at a premium of $5.86 to WTI for the same month.

Beijing wants a rollback in tariffs in its trade war with the U.S. before China can feasibly agree to buy as much as $50 billion of American agriculture products that President Donald Trump claims are part of an initial deal, people familiar with the matter said.

Meanwhile, in the U.S., crude inventories probably rose for a fifth straight week. That would be the longest stretch of increases since February. Analysts in a Bloomberg survey see stockpiles increasing 3 million barrels. The Energy Information Administration is scheduled to release its weekly inventory report on Thursday.

“The market has plenty of supply in the short-term,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. Investors are “expecting a big increase in supply this week because the refinery runs are so low.”

Other oil market news
Gasoline futures rose less than 1% to settle at $1.6144 a gallon. Advisers working on Saudi Aramco’s mammoth share sale may split a fee pool of as much as $450 million, according to people with knowledge of the matter, making it one of the biggest IPO pay outs globally. At least two Northeast Asian oil buyers are holding off from making spot purchases this month after a spike in shipping costs cut profit margins to the lowest in more than a decade. U.S. oil exporters are directing more cargoes toward European buyers as shipping costs rise, potentially pressuring benchmark crude prices in the North Sea.

Other oil market news

Gasoline futures rose less than 1% to settle at $1.6144 a gallon.
Advisers working on Saudi Aramco’s mammoth share sale may split a fee pool of as much as $450 million, according to people with knowledge of the matter, making it one of the biggest IPO pay outs globally.
At least two Northeast Asian oil buyers are holding off from making spot purchases this month after a spike in shipping costs cut profit margins to the lowest in more than a decade.
U.S. oil exporters are directing more cargoes toward European buyers as shipping costs rise, potentially pressuring benchmark crude prices in the North Sea.

--With assistance from Sheela Tobben.

To contact the reporter on this story: Jacquelyn Melinek in New York at jmelinek@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Jessica Summers, Mike Jeffers