A pump jack operates in the Permian Basin oil and natural gas production area near Odessa. Picture: REUTERS/NICK OXFORD
A pump jack operates in the Permian Basin oil and natural gas production area near Odessa. Picture: REUTERS/NICK OXFORD

London — Oil prices fell on Tuesday on lingering concerns over global demand and rising US production, though expectations for major producers to further curtail output offered support.

Brent crude futures were down 20c or 0.3% from the previous settlement at $58.29 a barrel by 6.43am GMT. The international benchmark has lost more than 20% since hitting its 2019 high in April. US West Texas Intermediate (WTI) futures were at $54.69 a barrel, down 24c or 0.4%.

A deepening trade war between the US and China, the world’s two largest economies and energy consumers, has weighed heavily on oil prices in recent months.

China’s central bank lowered its official yuan midpoint for the ninth straight day to a fresh 11-year low on Tuesday. A weaker yuan raises the cost of dollar-denominated oil imports into China, the world’s biggest crude oil importer.

Saudi Arabia, the de facto leader of oil cartel Opec, said last week that it plans to keep its crude exports below 7-million barrels per day (bpd) in August and September to help drain global oil inventories.

The kingdom’s plans to float its national oil company Saudi Aramco in what could be the world’s largest initial public offering (IPO) give it further impetus to boost prices.

“With Saudi Aramco reportedly eyeing an IPO once again, there is some support to the idea that Saudi Arabia has a heightened interest in strong crude prices and will cut its own output accordingly,” Vienna-based consultancy JBC Energy said.

Opec and its allies, known as Opec+, have agreed to cut 1.2-million bpd of production since January 1.

However, booming US shale oil output continues to chip away at efforts to limit the global supply overhang, weighing on prices. US oil output from seven major shale formations is expected to rise by 85,000 bpd in September to a record 8.77-million bpd, the Energy Information Administration (EIA) forecast in a report.

The start-up of a major pipeline between the Permian shale basin and the Gulf Coast means that more crude can be exported, adding to global supplies.

Stephen Innes, managing partner at VM Markets, said in a note, “The swift reaction from Saudi Arabia will likely stabilise oil prices, but the oil price probably won’t move much above $60 a barrel until there is evidence of progress in US-China trade negotiations.” 

Reuters


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