Oil prices decline as global glut concerns linger

22 January, 2019, 00:15 | Author: Sally Reid
  • Oil Slips as America's Record Output Weighed Against OPEC+ Curbs

"The oil industry can not afford to relapse into another downturn", he said in reference to a 2014-2016 oil market slump.

Last week, the US Energy Department forecast a slow recovery for Brent prices during 2019 - averaging US$61 a barrel for the year and nearing US$63 by the fourth quarter.

Oil headed for a third weekly increase on expectations that production cuts by OPEC and resilient fuel demand will keep global markets in balance.

Anxious by a drop in oil prices and rising supplies, OPEC and allies including Russian Federation agreed in December to return to production cuts in 2019.

The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from U.S. President Donald Trump to lower prices and cover an expected shortfall in Iranian exports. As of writing this article, Spot Crude oil WTIUSD is trading at $52.74 per barrel up by 1.07% on the day.

Earlier a source in OPEC told TASS that the publication of data on production cut quotas will make it possible to overcome the market skepticism around the December decision. To prevent markets tipping into oversupply, the OPEC cartel and its partners have announced substantial production cuts.

Even as OPEC and allied exporters cut production, however, USA output has surged close to 12 million bpd in the latest week, and some traders and investors are concerned that growth in global supply this year will outpace demand. Longs rose 1.8 percent, while shorts fell 10 percent.

The first ones include a growing world oil demand (+1.4 million barrels per day to 100.6 million b/d in 2019, according to the International Energy Agency), output reductions by OPEC and several non-OPEC countries (-1.2 million b/d, of which 800,000 b/d by OPEC countries and 400,000 b/d by non-OPEC countries), United States sanctions against Iran and the political, economic and social crisis in Venezuela, said the expert.

Man charged with murder over death of Aiia Maasarwe
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Oil market outlook unclear as economic uncertainty mounts.

Oil prices declined on Thursday as investors continued to worry about a global glut, which is fueled by rising USA crude output.

U.S. crude oil refinery inputs decreased during the week ending January 11, the U.S. Energy Information Administration (EIA) said on Wednesday. Prices got another boost later, on expectations that U.S. sanctions on Iran would cut supplies to major importers including China, India and Japan. The numbers fed concern that the outlook for global growth may be darkening, particularly given U.S. However, a coalition of 13 countries in the Americas (the Lima Group), announced in early January that they would not recognize Maduro as legitimate.

The second-largest was an involuntary cut by Libya, where unrest led to the shutdown of the country's biggest oilfield.

Indeed, Tamar Essner, director of energy and utilities at Nasdaq Corporate solutions, called the level of demand "The most unknown question for the oil markets for 2019.people are really anxious about these red flags in China in terms of auto sales coming down, retail sales coming down, and they're looking at that and saying maybe this is a leading indicator - that demand might come down in the future".

EIA expects growth in liquid fuels production in the United States and in other countries not part of the Organization of the Petroleum Exporting Countries (OPEC) will contribute to global oil inventory growth rates of 0.2 million b/d in 2019 and 0.4 million b/d in 2020. Therefore, the oil prices may drop on the release of the EIA report.

We have an EIA report today at 15:30 (GMT).

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