Oil Skids Below $60 as Barry Leaves Gulf, Chinese Economy Stalls
Oil traded near $60 a barrel after a storm shut almost three-quarters of U.S. Gulf of Mexico crude production.
(Bloomberg) -- Oil tumbled below $60 a barrel as a tropical storm that shut almost three-quarters of U.S. Gulf of Mexico production moved inland while China fueled concerns about demand growth.
Futures closed 1.1% lower in New York, the biggest loss in almost two weeks. With Hurricane Barry now ashore and weakening, drillers have begun restaffing offshore installations in the Gulf. About 69% of crude output remained shuttered, the U.S. government said Monday, down from 73% over the weekend.
Chinese government data, meanwhile, showed the world’s second-largest economy slowed to a three-decade low in the second quarter amid a prolonged trade dispute. While prices held near $60 for much of the session, they crossed below that key psychological mark around noon. That triggered automatic selling orders that then accelerated the slide, said Bob Yawger, director of futures at Mizuho Securities USA.
Crude has rallied this month thanks to shrinking U.S. stockpiles and rising tensions in the Middle East. Still, there are concerns over the longer term outlook, with OPEC warning of a glut in 2020 while the International Energy Agency points to a surprise increase in oil inventories in this year’s first half.
“Near term, the trend is still higher,” Tyler Richey, co-editor at Sevens Report Research in Florida, wrote in a note to clients. “But formidable technical resistance in the mid-$60s and persistent demand concerns due to the trade war will likely prevent prices from making new highs for the year.”
West Texas Intermediate for August delivery fell 63 cents to $59.58 on the New York Mercantile Exchange. Brent for September settlement was 24 cents lower at $66.48 on the ICE Futures Europe Exchange and traded at a premium of $6.80 to WTI for the same month.
Exxon Mobil Corp. and Chevron Corp. are among companies returning workers to offshore platforms and restarting output in the Gulf of Mexico. The region accounts for 16% of total American crude production, according to the Department of Energy.
See Also: Hedge Funds Snub Oil Ahead of Storm With Fewest Bets Since 2013
With Barry’s impact waning, the gasoline “crack" -- an estimate of profitability for producing the motor fuel -- fell more than 5% on Monday. That further undercut the appeal of WTI, said Thomas Finlon, director of Energy Analytics Group Ltd.
“In the final analysis, the storm wasn’t that bad and gasoline cracks are in a huge profit-taking mode," he said.
The IEA said Friday that production cuts by OPEC and its allies failed to prevent the return of a surplus in the first half of 2019. China’s gross domestic product rose 6.2% in the second quarter from a year earlier, below the 6.4% expansion in the first quarter.
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--With assistance from James Thornhill and Saket Sundria.
To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net;Alex Longley in London at alongley@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Mike Jeffers, Carlos Caminada
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