By Bloomberg News- May 23, 2019
Oil headed for its biggest drop in
two weeks as signs the worsening US-China trade war will take a toll on global
economic growth overshadowed the prospect of Opec and its allies extending
production curbs.
Futures in New York fell as much as
1.1 percent after Federal Reserve Bank of Boston President Eric Rosengren said
the trade standoff is adding a downside risk to his economic forecasts and the
Organization for Economic Cooperation and Development downgraded its projection
for global growth. The American Petroleum Institute was said to report US crude
stockpiles rose by 2.4 million barrels last week, putting more downward
pressure on prices.
Oil has swung between gains and
losses this month as investors assessed conflicting demand and supply signals.
The Organization of the Petroleum Exporting Countries and its allies have
suggested they may persist with output cuts at a time when rising tensions in
the Middle East and unplanned outages from Libya to Venezuela are tightening
the supply picture. Meanwhile, the sudden deterioration in US-China relations
suggests the trade war is here to stay.
“While forecasts by the OECD and
others suggest demand growth will slow, Opec is expected to control supply,”
said Miyoko Nakashima, a senior strategist at Mizuho Securities Co. in Tokyo.
“That means there is a limited upside, but prices may stay in a relatively
stable range.”
West Texas Intermediate crude for
July delivery fell 61 cents, or 1 percent, to $62.52 a barrel on the New York
Mercantile Exchange at 7:45 a.m. in London after dropping as much as 71 cents
earlier. The last time WTI closed down more than 1.1 percent was on May 7. The
June futures expired on Tuesday.
Brent for July settlement fell 36
cents, or 0.5 percent, to $71.82 a barrel on the London-based ICE Futures
Europe exchange after closing up 21 cents on Tuesday. The global crude
benchmark traded at a $9.28 premium to WTI.
The Paris-based OECD cut its 2019
global growth forecast to 3.2 percent from 3.3 percent after lowering the
projection from 3.5 percent in March. US chipmakers warned that everyone will
suffer from the escalating trade war, while American retailers including Home
Depot Inc. and J.C. Penney Co. are sounding the alarm over the rising costs the
dispute will bring.
A worsening trade war could push WTI
below $60 a barrel, Mizuho’s Nakashima said.
If US government data due on
Wednesday confirms the API report, that will be the fourth gain in crude
inventories in five weeks. However, the median estimate of analysts surveyed by
Bloomberg is for a decline of 1.7 million barrels. B
Oil facilities in Libya were
targeted in acts of sabotage, according to the nation’s state oil company,
while Nigeria’s Forcados crude pipeline has been closed as a precaution after a
fire occurred nearby.
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