Oil Prices Drop as Demand Worries Offset Hopes for Saudi-led Supply Cut
Investing.com – Oil prices traded lower on Tuesday, breaking a three-day winning streak, as concerns over a weakening global economy offset hopes that OPEC would be able to cut supply enough to support prices.
New York-traded West Texas Intermediate crude futures fell 45 cents, or 0.8%, to $54.48 a barrel by 8:28 AM ET (12:28 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., lost 23 cents, or 0.4%, to $58.34.
Fears of a global recession are on the rise as the U.S. and China stand strong in their head-to-head trade conflict.
Bank of America Merrill Lynch’s latest monthly survey showed that one-third of investors polled expect there to be a worldwide recession in the next 12 months, the highest reading since 2011.
Goldman Sachs recently ruled out the possibility of an agreement between Washington and Beijing ahead of the 2020 presidential election, adding that the odds of a recession are on the rise.
Oil traders fear a corresponding negative impact to overall demand on the back of signs of a weakening global economy.
Both the International Monetary Fund and the International Energy Agency cut forecasts for global oil demand last week.
Weakening demand may be getting the upper-hand against oil bulls who hold hopes that OPEC will react to falling prices with more effort to reduce supply.
Ole Hansen, head of commodity strategy at Saxo Bank, tweeted that the oil market was still “undecided”, noting that long positions in both West Texas Intermediate and Brent oil have been stuck in the same range for several months.
“That may be surprising, given the renewed verbal intervention from oil producers increasingly frustrated to see that their medicine – production cuts – isn’t having the desired effect,” he said in comments cited by Bloomberg.
Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said late last week it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories.
Analysts also suggested that the kingdom’s government would seek to bolster prices ahead of its initial public offering for Saudi Aramco.
Kuwait also appeared to be on board as its oil minister, Khaled al-Fadhel, said it had cut its own output by more than required by the accord.
Later in the session, attention will shift to weekly data from the American Petroleum Institute on U.S. crude stockpiles.
That comes ahead of the official government data from the Energy Information Administration. Last week, the EIA said crude inventories rose by 2.4 million barrels, putting an end to seven consecutive draws.
In other energy trading, gasoline futures lost 0.3% to $1.6604 a gallon by 8:30 AM ET (12:30 GMT), while heating oil declined 0.3% to $1.8000 a gallon.
Lastly, natural gas futures traded up 0.9% to $2.123 per million British thermal unit.
— Reuters contributed to this report.