Sat, December 02, 2023

Oil Prices Fall as Future Growth Blurs

iran flag and oil

Oil prices slipped on Monday in the midst of cautious sentiment as a slip in financial markets last week and dollar strength in the earlier week highlighted concerns that growth may be slowing down, especially within Asia’s emerging economies

Fron-month Brent crude oil futures were trading lower 46 cents, or 0.6 percent, at $77.16 per barrel.

US West Texas Intermediate crude futures were at $67.19 per barrel, lower 40 cents, or 0.6 percent.

Investors were still anxious after the huge losses last week, while a stronger dollar on safe-haven buying puts pressure on the purchasing power of emerging markets.

“The bears seem well in control of the market and there are many reasons to justify their actions,” said Hussein Sayed, who is the chief market strategist at futures brokerage FXTM.

According to him, the main reasons for the selloff were the “weakening global economic growth, the ongoing US-China trade war, monetary policy tightening, fears of hard Brexit (and) Italy’s budget woes.”

Eastport, which is a Singapore-based ship tanker brokerage, said that financial market turmoil may “weigh on investment and consumer spending, reducing trade flows and ultimately hitting demand.”

Hedge funds cut their bullish wagers on US crude in the most recent week to the lowest level in more than a year, the US Commodity Futures Trading Commission said on Friday.

The speculator group slashed its combined futures and options positions in New York and London by 42,644 contracts to 216,733 in the week ended on October 23z, the lowest level since September of 2017.

There were also some signals of sluggish growth in global trade, with rates of dry-bulk and containers ships, which carry most raw materials and manufactured goods, coming under pressure.

On the supply side, meanwhile, oil markets remain tense ahead of looming US sanctions against Iran’s crude exports, which are due to start next week and are expected to tighten supply, especially to Asia which takes most of Iran’s shipments.

In an attempt to keep some exports up, Iran has begun selling crude to private companies via domestic exchange for the first time, the oil ministry’s news website SHANA reported on Sunday.

The tight Asian market is visible in the low amount of unsold crude oil stored  on tankers on waters around Singapore and southern Malaysia, the region’s main oil trading and storage hub.

Just four stationary supertankers are at present filled with crude oil, according to Refinitiv Eikon ship tracking data. This is lower than the nearly 15 supertankers a year ago, and from 40 in middle 2016 during the height of the supply glut.

On the flip side, in North America, there is no oil shortage as US crude oil production has increased by almost a third since mid-2016 to around 11 million barrels per day.

Production is expected to increase further, with US drillers adding two oil rigs in the week to October 26, bringing the total count to 875, which is the highest level since March 2015, said Baker Hughes energy services on Friday.

More than half of all US oil rigs are in the Permian basin in West Texas and eastern New Mexico, the country’s largest shale oil formation.


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