Commodities

Oil prices drop lower, weighed down by gloom over global economy

Reuters SINGAPORE | Updated on October 07, 2019 Published on October 07, 2019

A faster-than-expected resumption in Saudi Arabia's production after the September 14 attack on key production facilities, also exerted downward pressure on oil prices

Brent crude futures edge down 28 cents to $58.09 a barrel

Oil prices fell on Monday, extending last week's heavy losses, with traders fearing the global economic slowdown will weigh on future oil demand growth, while pegging hopes for a rebound on progress in talks this week on ending the US-China trade war.

Brent crude futures edged down 28 cents to $58.09 a barrel by 0300 GMT, while US West Texas Intermediate (WTI) crude was at $52.64, down 17 cents.

Both contracts ended last week with a more-than-5 per cent decline after dismal manufacturing data from the US and China, as the lingering row between the world's top economies hurts global growth and raises the risk of recession.

US and Chinese officials will meet in Washington on October 10-11 in the next, much-anticipated fresh effort to work out a deal.

On the supply side, a faster-than-expected resumption in Saudi Arabia's production after a September 14 attack on key production facilities also exerted downward pressure on oil prices, although West Asia remained tense.

“The macro headwinds outweigh supply concerns for oil now, despite tensions in West Asia and a reduced spare capacity pillow,” said Stephen Innes, Asia-Pacific market strategist at AxiCorp.

In Iraq, the second-largest producer among the Organisation of the Petroleum Exporting Countries, deadly anti-government unrest is posing the biggest security and political challenge so far to Prime Minister Adel Abdul Mahdi's year-old government.

Iraq's oil exports of 3.43 million barrels per day (bpd) from the Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group's practice head for West Asia and North Africa, said in a note.

“Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies (spare capacity),” he said.

“While Saudi oil production is now close to 9.9 million bpd, it is not clear that the capacity is fully operational at 11.3 million bpd and the (attacked) Abqaiq facility has lost a significant part of its redundancy.”

Global supply also faces facility repair and maintenance pressures.

The Buzzard oil field in the British North Sea has been shut for pipe repair work, a spokesman from China's CNOOC said on Friday. Buzzard is the main contributor to the Forties crude stream, the largest of the five North Sea oil grades that underpin Brent crude futures.

Meanwhile Libya's National Oil Corporation (NOC) said on Sunday it will close the Faregh oil field at Zueitina port for scheduled maintenance from Monday until Oct. 14.

Published on October 07, 2019
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