An oil tanker unloads crude oil at a crude oil terminal in Zhoushan, Zhejiang province, China. Picture: REUTERS/STRINGER/CHINA OUT
An oil tanker unloads crude oil at a crude oil terminal in Zhoushan, Zhejiang province, China. Picture: REUTERS/STRINGER/CHINA OUT

Singapore — Oil markets dropped by about 1% in 2019’s first trading on Wednesday, pulled down by surging US output and concerns about an economic slowdown in 2019 as factory activity in China, the world’s biggest oil importer, contracted.

International Brent crude futures for March were at $53.27 a barrel at 4.21am GMT, down 53c, or 1%, from their final close of 2018.

West Texas Intermediate (WTI) futures were at $45.01 a barrel, down 40c, or 0.9%.

In physical oil markets, Dubai crude averaged $57.318 a barrel for December, the lowest since October 2017, two traders who participate in the market said on Wednesday.

Similarly, Malaysia’s Petronas set the official selling price of a basket of December-loading Malaysian crude grades at $62.79 a barrel, the lowest since October 2017, the state oil firm said on Wednesday.

Traders said futures prices fell on expectations of oversupply amid surging US production and concerns about a global economic slowdown.

“We are most likely past the peak of this long economic uptrend,” consultancy JBC Energy said in an analysis of 2018.

Factory activity weakened in December across Asia, including in China, as the China-US trade war and a slowdown in Chinese demand hit production in most economies, pointing to a rocky start for the world’s top economic growth region in 2019.

Oil prices ended 2018 lower for the first time since 2015, after a desultory fourth quarter that saw buyers flee the market over growing worry about too much supply and mixed signals related to renewed US sanctions on Iran.

“Oil prices … registered their first yearly decline in three years on fears of a slowing global economy and concerns of an ongoing supply glut,” said Adeel Minhas, a consultant at Australia’s Rivkin Securities.

For the year, WTI futures slumped nearly 25%, while Brent tumbled nearly 20%.

The outlook for 2019 is riddled with uncertainty, analysts said, including the US-China trade concerns and Brexit, as well as political instability and conflict in the Middle East.

A Reuters poll showed oil prices are expected to trade below $70 a barrel in 2019 as surplus production, much of it from the US, and slowing economic growth undermine efforts led by oil cartel Opec to cut supply and prop up prices.

On the production side, all eyes will be on the ongoing surge in US output and on Opec’s and Russia’s supply discipline.

“Don’t underestimate shale producers and the wider US oil industry in general. Too often this year the market pushed stories … bottlenecks (pipelines, frack crews, truck drivers, etc), yet US oil production will have grown by a massive more than 2--million barrels a day between the beginning of 2018 and the beginning of 2019,” JBC Energy said.

US crude output rose to an all-time high of 11.537-million barrels a day in October, the Energy Information Administration (EIA) said on Monday. That makes the US the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Weekly data, which is more open to revisions, was reported last week at 11.7-million bpd in late December by the EIA.