Oil steadies, but rattled by slow global demand
london — Oil prices rose on Tuesday, but faced headwinds from concern over slowing demand and the rise in US crude output that has shaken investors’ faith in the ability of Opec to rebalance the market.
Brent crude futures were up 20 cents at $49.54 per barrel at 0852 GMT, above a session low of $49.18, while US West Texas Intermediate futures were up 21 cents at $46.64 per barrel.
Weekly US data on crude production and inventories, plus monthly reports on supply and demand from the Organisation of the Petroleum Exporting Countries and the US Energy Information Administration this week, should provide a detailed picture of how quickly global crude inventories are falling.
“We really need to see some of the data starting to support the idea that global inventory levels are coming down,” Saxo Bank senior manager Ole Hansen said.
“Almost as importantly, there have been some signs that there has been some wavering in terms of demand growth.”
High US gasoline stocks have fed some concern about demand in the United States, where consumer spending expectations hit a three-year low last month and vehicle sales have fallen year-on-year for four months in a row.
Coupled with that is faltering manufacturing activity and a drop in commodity imports in China, the world’s second-largest economy and biggest raw materials consumer.
Even though Opec has stuck to its pledge to cut production, US output has risen by more than 10 per cent since mid-2016 to 9.3 million barrels per day, close to the output of Russia and Saudi Arabia.
“That’s making it difficult to drive the stockpiles down to a level Opec thinks will see prices rise sustainably,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Bank of America Merrill Lynch said the low oil prices were also due to a slowdown in demand.
“Oil demand growth this year is underwhelming, in part explaining why crude oil prices and refining margins have sold off sharply recently,” it said.
On the physical markets, barrels of North Sea crude changed hands at their lowest levels since late 2015 on Monday.
Top exporter and de facto Opec leader Saudi Arabia said on Monday it would “do whatever it takes” to rebalance a market that has been dogged by oversupply for over two years. — Reuters