Oil futures off 2019 high as US production soars
The economic slowdown prompts concern over demand growth with Opec-led supply cuts in place since the start of year
London — US crude futures briefly hit a 2019 high on Friday but later retreated along with benchmark Brent oil, as worries about the global economy and robust US production put a brake on prices.
West Texas Intermediate (WTI) crude oil futures were down 3c at $58.58 per barrel at 11am GMT, having hit their highest so far this year at $58.95.
Brent crude futures were at $66.92 per barrel, down 31c from their last settlement, and more than $1 off their 2019 peak of $68.14 reached on Thursday.
“The market is still torn between economic concerns and high US oil production on the one hand and remarkable Opec-Plus compliance on the other. The latter is greatly aided by unplanned cuts in production,” PVM oil broker Stephen Brennock said.
Oil cartel Opec and its allies including Russia, an alliance known as Opec-Plus, agreed to cut production in 2018, partly in response to increased US shale production. Opec-Plus ministers will meet on April 17-18 to decide output policy.
“If Opec-Plus decides to extend [cuts] … we expect that inventories will continue to draw through at least quarter three,” US investment bank Jefferies said on Friday.
The International Energy Agency (EIA) said on Friday that the market could show a modest surplus in the first quarter of 2019 before flipping into a deficit in the second quarter by about 500,000 barrels per day (bpd).
It said a comfortable supply cushion by Opec could prevent any price rally in case of possible disruptions, and that non-Opec oil output growth led by the US should ensure demand is met.
Concern that an economic slowdown that has gripped large parts of Asia and Europe will dent growth in fuel demand has prevented oil from rising further. But oil demand has held up well so far.
Crude oil use in China, the world’s biggest importer, in the first two months of 2019 rose 6.1% from a year earlier to a record 12.68-million bpd, official data showed this week.
Goldman Sachs said growth in global demand for crude in January was “nearly 2-million bpd, with strength visible in both emerging markets and developed economies”.