Oil slides on economy fears, stuck in tightest range since 2017
LONDON (Bloomberg) -- Oil fell as a weakening outlook for the global economy and rising crude stockpiles in the U.S. signaled that markets will remain comfortably supplied.
Futures in New York retreated as much as 2.7%. They have held this week in the narrowest range since December 2017 as traders balance concerns over fuel demand and economic growth with OPEC’s aggressive supply cuts. U.S. crude inventories surged far more than expected last week, according to government data.
Crude prices this year climbed more than 25% through mid-February as the Organization of Petroleum Exporting Countries and its partners curbed output, and American sanctions on Iran and Venezuela also tightened supplies. But the rally has stalled since then. The European Central Bank cut economic forecasts, China reduced its goal for expansion and the OECD lowered its global projections. The U.S.-China trade spat is adding to the uncertainty.
“Global risk sentiment took a blow” after the ECB’s economic outlook and has dragged oil lower, said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen. “In addition, the market is still weighing whether the strong inventory build last week is a sign of weak demand.”
West Texas Intermediate for April delivery declined as much as $1.52 to $55.14/bbl on the New York Mercantile Exchange and was at $55.38 at 8:26 a.m. local time. Prices are down 0.8% this week.
Brent for May settlement fell $1.51, or 2.3%, to $64.79/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude’s premium over WTI for the same month narrowed to $9.06/bbl.
Economic slump
The ECB cut its euro-area growth forecast for the year by the most since the advent of its quantitative-easing program four years ago. Even then, some of its policy makers thought the outlook was too optimistic. Earlier this week, the Paris-based Organization for Economic Cooperation and Development slashed its estimate for world economic growth to 3.3% in 2019, downgrading almost every Group of 20 nation’s economy.
Meanwhile, reflecting the toll of the ongoing trade war, China’s exports fell in February and imports weakened as well, according to customs data. Days earlier, the world’s biggest oil importer had lowered its economic growth target for the year.
“Worries over global economic growth prospects continue to be a big cap on oil prices,” said Vandana Hari, founder of Vanda Insights, a Singapore-based provider of oil market analysis. OPEC’s monthly report will “help shape market sentiment next week, with the market paying particular attention to any changes in global demand-growth forecasts.”
