Oil falls on economic slowdown, but OPEC output cuts offer some support
U.S. West Texas Intermediate (WTI) crude futures stood at $52.20 per barrel by 0351 GMT, down 44 cents, or 0.8 percent, from their last settlement. WTI dropped by around 2.5 percent the previous session.
International Brent crude oil futures were down by 44 cents, or 0.7 percent, at $61.19 per barrel, after falling 1.7 percent the previous session.
Weighing on financial markets, including crude oil futures, were concerns that trade disputes between the United States and China would remain unresolved, denting global economic growth prospects.
U.S. President Donald Trump said on Thursday he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to strike a trade deal.
If there is no agreement between the world’s two biggest economies, Trump has threatened to increase U.S. tariffs on Chinese imports. Another round of talks is scheduled for next week in Beijing.
“Crude prices returned to the lows of the week as slower growth prospects...could signal a return (of reasons) for inventories to rise,” said Edward Moya, market analyst at futures brokerage Oanda.
On Thursday, the European Commission sharply cut its forecasts for euro zone economic growth as it expects global trade tension and an array of domestic challenges.
The Commission said growth this year would slow to 1.3 percent from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent.
Despite this, traders said crude prices were prevented from falling much further by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), adopted late last year with the aim of tightening the market and propping up prices.
As part of the cuts, Saudi Arabia - the world’s biggest crude exporter - cut its output in January by about 400,000 barrels per day (bpd) to 10.24 million bpd, according to OPEC sources, informs Reuters.
That puts Saudi crude oil production almost 1.7 million bpd below that of the United States, which has been churning out around 11.9 million bpd in late 2018 and early 2019 - up by more than 2 million bpd from a year earlier.
Another risk to supply comes from Venezuela after the implementation of U.S. sanctions against the OPEC member’s petroleum industry in late January. Analysts expect this move to knock out 300,000-500,000 bpd of exports.
Yet for the time being, the sanctions impact on international oil markets was limited.
“The (Venezuela) disruption overall seems manageable both for the U.S. and the global market,” said Norbert Rücker, head of commodity research at Swiss bank Julius Baer. “The oil market sits on a comfortable cushion of supply.”