Oil falls 1 percent as supply concerns fade

Karvounis lies at anchor stranded off the coast of Louisiana

Karvounis lies at anchor stranded off the coast of Louisiana

Oil prices fell on Monday after disappointing USA factory data sparked fresh concerns about a slowdown in the global economy, but losses were limited as OPEC-led supply cuts and us sanctions against Venezuela pointed to tighter supply.

US West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.8 percent, to $54.09 a barrel after posting a session low of $52.86 a barrel.

USA crude inventories rose by 2.5 million barrels last week and gasoline stocks also increased, the American Petroleum Institute said.

Opec's sales to the world's biggest economy fell 22 per cent month-on-month and 37 per cent year on year, to 1.4m barrels per day, data from energy intelligence company Kpler shows.

"All that uncertainty is based on a few known events that we have, the Iranian sanctions waivers and the Venezuelan sanctions but also the OPEC-plus cuts, those are expected to go for the first six months of the year - and then it's uncertain what's going to happen", he added.

The API reported a 2.5M barrel build during last week.

The producers known as OPEC+ began cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut and OPEC has delivered nearly three quarters of its pledged cuts already, a Reuters survey showed.

"Basically it's a pretty supportive report", said Phil Flynn, oil analyst at Price Futures Group in Chicago.

"Anything out of the State of the Union that hints at the US-China deal not working out, or more anti-trade rhetoric would be a negative for energy prices as demand would be lower if global growth keeps being downgraded", said Alfonso Esparza senior market analyst, OANDA.

This news may have been offset by robust U.S.jobs data and a stronger-than-expected ISM Manufacturing PMI report on Friday, but traders turned bearish on Monday when the government reported that new orders for USA -made goods unexpectedly fell in November amid sharp declines in demand for machinery and electrical equipment, suggesting a slowdown in manufacturing as 2018 ended. Bullish traders are banking on the Venezuelan oil sanctions and the OPEC-led production cuts to provide support.

"The price has yet to react in any noticeable way", Fritsch said of the sanctions announced last week.

"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Also dampening market sentiment still were worries about weaker global economic growth and the US-China trade dispute. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

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