Extracted crude oil splashes on a worker’s hand as it’s being pours from a pipe in the village of Wonocolo, East Java, Indonesia (Photographer: Dimas Ardian/Bloomberg)

Oil Caps Worst Month Since 2016 on Economic Slowdown Worries

(Bloomberg) -- Oil capped its worst month in more than two years as concerns mount that the global economy will slow down.

Futures in New York closed 1.3 percent lower on Wednesday, extending October’s loss to 11 percent, the biggest since July 2016. A global equity rout and an escalating U.S.-China trade war are stirring demand-growth concerns. U.S. supply data also showed a sixth straight weekly rise in domestic crude inventories.

“There’s a sense that the global economy goes into a bit of a slowdown and demand in 2019 isn’t quite as robust as it has been over the past couple years,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise in Leawood, Kansas. “We are still in more of a risk-off sentiment.”

Oil Caps Worst Month Since 2016 on Economic Slowdown Worries

On top of demand concerns, all eyes are on any impact from Iranian sanctions that are set to kick in on Nov. 4, with many taking a view that Saudi Arabia and OPEC will pump enough to fill any supply shortages.

“We’re right on the cusp of Iran sanctions taking full effect. They may be able to get more barrels to the market in a more clandestine fashion, but that’s a wait-and-see,” said Stewart Glickman, an energy equity analyst at CFRA Research. “On the demand side, there are macro fears and this is a reasonable factor to be worried about. You have the potential for a recession that would eat into GDP, and of course, GDP and global oil demand are pretty well-correlated.”

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West Texas Intermediate crude for December delivery dipped 87 cents to settle at $65.31 a barrel on the New York Mercantile Exchange, the lowest since Aug. 15. Total volume traded was about 7 percent below the 100-day average.

Brent for December, in its last session before expiry, fell 44 cents to settle at $75.47 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $10.16 premium to WTI. The more-active January Brent contract fell 91 cents to end the session at $75.04 a barrel.

The EIA reported U.S. crude stockpiles rose 3.22 million barrels last week, while distillate and gasoline supplies declined. The data also showed refinery utilization rates ticked higher for a second straight week, signaling seasonal maintenance might be coming to a close.

Other oil-market news:
  • Gasoline futures fell 2.1 percent to settle at $1.7680 a gallon, the lowest level since February. 
  • Several countries “may not be able to go all the way to zero” right away on purchases of Iranian oil after U.S. sanctions on the Middle East nation take effect, White House National Security Adviser John Bolton says at an event in Washington.
  • Colorado is finally pumping more oil than California, a distinction earned just days before voters in the Rocky Mountain state decide whether to curb drilling there.
  • While global oil supply and demand fundamentals will be generally balanced in 2019, product market weakness will build in late 2020, according to ESAI Energy.

©2018 Bloomberg L.P.