Global gloom clouds oil market
Traders peg hopes for a rebound on progress in talks this week on ending the US-China trade war
Singapore — Oil prices fell on Monday, extending last week’s heavy losses, with traders fearing the global economic slowdown will weigh on future oil demand growth while pegging hopes for a rebound on progress in talks this week on ending the US-China trade war.
Brent crude futures edged down 28 cents to $58.09 a barrel by 5am, while US West Texas Intermediate (WTI) crude was at $52.64, down 17 cents.
Both contracts ended last week with a more than 5% decline after dismal manufacturing data from the US and China, as the lingering row between the world’s top economies hurts global growth and raises the risk of recession.
US and Chinese officials will meet in Washington on October 10-11 in the next fresh effort to work out a deal.
On the supply side, a faster-than-expected resumption in Saudi Arabia’s production after a September 14 attack on key production facilities also exerted downward pressure on oil prices, though the Middle East remained tense.
“The macro headwinds outweigh supply concerns for oil now, despite tensions in the Middle East and a reduced spare capacity pillow,” Stephen Innes, Asia Pacific market strategist at AxiCorp, said.
In Iraq, the second-largest Opec producer, deadly antigovernment unrest is posing the biggest security and political challenge so far to Prime Minister Adel Abdul-Mahdi’s year-old government.
Iraq’s oil exports of 3.43-million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group’s practice head for Middle East and North Africa, said in a note.
“Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies [spare capacity],” he said.
“While Saudi oil production is now close to 9.9-million bpd, it is not clear that the capacity is fully operational at 11.3-million bpd and the [attacked] Abqaiq facility has lost a significant part of its redundancy,” Kamel said.
Global supply also faces facility repair and maintenance pressures.
The Buzzard oilfield in the British North Sea has been shut for pipe repair work, a spokesperson of the China National Offshore Oil Corporation (CNOOC) said on Friday. Buzzard is the main contributor to the Forties crude stream, the largest of the five North Sea oil grades that underpin Brent crude futures.
Meanwhile Libya’s National Oil Corporation (NOC) said on Sunday it will close the Faregh oilfield at Zueitina port for scheduled maintenance from Monday until October 14.