By Abdullahi Mohammed
Oil prices fell by more than 1 per cent on Thursday on swelling U.S. supply and amid caution after talks between the United States and China finished without any concrete details on a resolution to their trade disputes.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $51.66 per barrel at 0807 GMT, down 70 cents, or 1.3 per cent, from their last settlement.
International Brent crude futures LCOc1 were down 1.2 percent, or 72 cents, at $60.72 per barrel.
Both oil benchmarks rose by around 5 per cent on the previous day as financial global markets surged on hope that Washington and Beijing may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and the risk of damage to global growth.
“The three-day talks between U.S. and Chinese officials played a significant role in calming the markets.
“There were clear signs of progress in terms of moving towards higher levels of negotiations,” said Hussein Sayed, chief market strategist at futures brokerage FXTM.
Some of the positive feeling ebbed on Thursday because of a lack of a details on the talks despite a warm statement from China on the outcome.
“The rally we have witnessed so far in 2019 is nothing to do with fundamentals, the rally is purely based on optimism and hope,” said Matt Stanley, a fuel broker with Starfuels in Dubai.
Vandana Hari of consultancy Vanda Insights in Singapore said in a note that oil prices dropped “as optimism fueled by the U.S.-China trade talks earlier in the week appeared to have run its course, and official statements after the conclusion of three days of negotiations, while indicating modest progress, lacked details.”
Meanwhile, U.S. bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 per cent on Wednesday, pointing to “weakening economic growth expectations” and rising oil supply, especially from the United States, as reasons for their lower price forecast.
Morgan Stanley now expects Brent to average $61 a barrel this year, down from a previous estimate of $69 a barrel, and U.S. crude to average $54 per barrel, against a prior forecast of $60.
The main source of new supply is the United States, where crude oil production C-OUT-T-EIA remained at a record 11.7 million barrels per day (bpd) in the week ended Jan. 4, the Energy Information Administration (EIA) said on Wednesday.
That has resulted in swelling fuel inventories.
Gasoline stocks USOILG=ECI rose 8.1 million barrels, to 248.1 million barrels, marking the largest weekly rise since December 2016, the EIA said. Distillate stocks USOILD=ECI swelled by 10.6 million barrels, to 140.04 million barrels.
Although crude stocks C-STK-T-EIA dipped by 1.7 million barrels, to 439.74 million barrels, they remained above their five-year seasonal average of 435 million barrels.
The surge in U.S. crude production runs counter to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut supply aimed at reining an emerging glut.
“Balancing the market would require OPEC discipline to continue well into 2020,” Morgan said. (Reuters/NAN)
