Oil falls amid economic slowdown; supply cut consensus offers support

Jeannie Matthews
June 6, 2019

Sechin-who has criticized Russia's involvement in the deal in the past-questioned the Russian rationale of sticking to the cuts, saying that the USA would take market share out of Russia if the OPEC+ deal is extended.

Futures strengthened slightly early in the session and then plunged after US inventory data was released. Brent fell as low as $60.2 per barrel earlier, the lowest level since January 2019. WTI was last down $1.24, or 2.3%, at $52.24 USA a barrel, its lowest since February's reading of $52.11, plumbed on Monday.

"The continued escalation in trade tensions and broad-based fall in manufacturing. suggest that the downside risks to growth are becoming more prominent", USA bank Morgan Stanley said.

"Crude inventories are now at their highest since July 2017, up almost 44 million barrels since mid-March", said Matt Smith, director of commodity research at ClipperData.

"Obviously it's more than enough to satisfy demand by a lot and just makes for a really bearish report across the board", Kilduff added.

A surge in imports and a increase in domestic production boosted inventories, he said.

At Monday's (June 3rd) market closure, UK Crude or Brent crude had rounded off the day 1.2 percent lower at $61.28 per barrel, while US WTI (West Texas Intermediate) crude futures had shed 0.5 percent to settle day at $53.25 per barrel.

OPEC produces some 40 percent of the worldwide demand for crude oil.

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"The stock build does not help sentiment in the current market environment", ING bank said.

Oil prices resumed their slide on Wednesday, dragged down after an unexpected gain in U.S. inventories but with losses capped by a recovery in global equities on hopes of a U.S. Fed rate cut.

"The prolonged trade war has sparked fears of a global economic slowdown as well as weaker oil demand", tanker brokerage Eastport said on Tuesday.

(Graphic: U.S. crude inventories, weekly changes since 2017 png link: tmsnrt.rs/2XlX17b).

The oil market has been weighed down by concerns about slowing global growth due to the US-China trade war and President Donald Trump's threats last week to place tariffs on Mexican imports if more was not done to halt illegal immigration across the Mexican border.

President Donald Trump announced the US withdrawal from the nuclear deal with Iran in May 2018.

Saudi Arabia, the de-facto leader of the Organisation of the Petroleum Exporting Countries (OPEC), indicated that the group of oil producers together with Russian Federation would continue managing global crude supplies to avoid a surplus.

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