Published: Thu, June 06, 2019
Markets | By Otis Pena

Oil falls amid economic slowdown; supply cut consensus offers support

Oil falls amid economic slowdown; supply cut consensus offers support

The Nasdaq closed 2.7% higher, erasing its losses after a steep selloff on Monday driven by worries about tech company regulation.

Crude oil futures fell 0.51 per cent to Rs 3,696 per barrel Tuesday in line with a weak overseas trend.

With U.S. production surging, more of its oil is being exported.

Last night it was trading down about 1.8 per cent at $60.85 a barrel.

Crude oil price trended lower after the Energy Information Administration reported a weekly build in crude oil inventories, at a sizeable 6.8 million barrels.

"Yesterday's upswing on the back of rising stock markets was halted by an unexpectedly sharp rise in USA crude oil and product stocks", Commerzbank said.

Brent futures settled down $1.34, or 2.2%, at $60.63 a barrel.

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A downward revision by the World Bank in its global growth forecast, the IMF's lower forecast for the Chinese economic growth and data from ADP showing a weak private sector employment growth in the US raised concerns about energy demand and weighed on oil prices.

Meanwhile, Saudi Arabia sought to arrest the oil price slide in recent days, reiterating on Monday that the Kingdom and OPEC would do "whatever it takes" to rebalance the oil market by "drawing down inventories from their now elevated levels", Saudi Arabia's Energy Minister Khalid al-Falih said.

To prevent oversupply and prop up the market, OPEC, together with allies including Russian Federation, has withheld supply since the start of the year.

While Mexico had rejected a possible US ploy to take back all Central American asylum seekers, the possibility of Mexico tariffs made headway, and a further escalation of Sino-US trade war following Beijing's threat to curb rare earth element export had begun to take death toll and raised questions over crude oil demands over an elusive possibility of trade agreement between United States and China in a near-term outlook.

The group plans to decide later this month or in early July whether to continue withholding supply.

Crude oil prices dropped Wednesday, and according to experts are now on track to enter a bear market, as USA data revealed a weekly crude supply climb of almost 7 million barrels, to their highest level in nearly two years.

Meanwhile, Saudi Energy Minister Khalid al-Falih has called recent volatility "unwarranted" and has said he expects OPEC to help to stabilize prices beyond the end global output pact that ends at the start of July. OPEC's de-facto leader Saudi Arabia said on Monday a consensus was emerging for continued cuts in the second half of the year to ensure market stability.

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