Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN
Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN

Singapore — Oil prices slipped on Thursday amid volatile currency and stock markets, and as analysts warned of an economic slowdown for 2019 just as crude supplies are rising globally.

US West Texas Intermediate (WTI) crude oil futures dropped by 1.7%, or 79c, from their last settlement to $45.75 by 4.53am GMT.

International Brent crude futures were down 0.8%, or 46c, at $54.45 a barrel.

In physical oil markets, top exporter Saudi Arabia is expected to cut February prices for heavier crude grades sold to Asia by up to 50c a barrel due to weaker fuel oil margins, respondents to a Reuters survey said on Thursday.

Markets were roiled by a more than 3% slump of the dollar against the Japanese yen overnight, and after tech giant Apple cut its sales forecast.

“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook said.

The slowdown in China and turmoil in stock and currency markets is making investors nervous, including in oil markets.

The CEO and president of Jefferies Financial Group, Rich Handler and Brian Friedman, wrote in a joint note to clients and employees that the start of the year was a period of “extreme disarray” and that “the future doesn't feel as certain and optimistic, and the path forward does not seem as clear”.

Although the investment bank pointed out that especially the US economy was “still in a good place”, it added that the China-American “trade war has become an impediment” and that “markets are extremely volatile and virtually impossible to anticipate or navigate”.

Shipping brokerage Eastport said the turmoil in markets is scaring off investors.

“Falling share prices tend to damage consumer sentiment, which often results in increased caution and reduced spending.… Business managers also tend to limit capex, thus weighing on investment as well.”

Supply surge

More fundamentally, oil markets have come under pressure from a surge in supply just as demand growth is expected to slow amid the market turmoil.

US crude production stood at a record 11.7-million barrels a day in late 2018, making America the world’s biggest oil producer.

Others are not sitting idle, with Russian output reaching a record of more than 11-million barrels a day in 2018.

Supply from Iraq, the number two producer in oil cartel Opec, is also up, with December exports at 3.73-million barrels a day, up from 3.37-million barrels a day in November.