U.S. oil stumbles to nearly 2-month low as crude set for third straight decline
U.S. oil futures on Thursday looked on pace to deliver a third straight decline, taking the contract to its lowest level since late March as a broad aversion to assets perceived as risky gripped global markets, knocking down equity markets.
West Texas Intermediate crude for July delivery CLN19, -1.61% on the New York Mercantile Exchange was off $1.12, or 1.8%, at $60.30 a barrel, which would place the most-active contract near its lowest level since late March, according to FactSet data. The day’s early action follows a 2.7% skid for the commodity that represented its largest single-session dollar and percentage drop since May 2.
Global benchmark July Brent BRNN19, -1.72% was off $1.28, or 1.8%, at $69.71 a barrel on ICE Futures Europe, which would represent its lowest level since May 7, after a 1.7% slump on Wednesday.
The flare-up in trade tensions between the world’s largest economies, U.S. and China, has raised doubt about near-term appetite for crude if a tariff conflict remains unresolved for a protracted period, market participants have said.
Commodity investors fear that those tariff tensions could intensify a deceleration of the global economy that appears to already be at hand in Europe. U.S. stock-market indexes, the Dow Jones Industrial Average YMM19, -0.85% DJIA, -0.39%and the S&P 500 index ESM19, -0.85% SPX, -0.28% were poised to fall sharply at Thursday’s start of trade, while stocks in Europe SXXP, -1.28% and Asia000300, -1.79% were in retreat mode.
On the supply-demand side, crude’s downdraft took flight on Wednesday as the Energy Information Administration reported that U.S. crude supplies rose by 4.7 million barrels for the week ended May 17, marking a second weekly climb in a row. Analysts polled by S&P Global Platts expected a fall of 2 million barrels, on average. However, data from the American Petroleum Institute on Tuesday had shown an increase of 2.4 million barrels.
Total domestic crude production was estimated at 12.2 million barrels a day last week, up 100,000 barrels from the previous week, the report said.
Middle East tensions, centered on sanction-related conflict between the U.S. and Iran, has been a key support for prices, however, capping a deeper decline.
Despite the skid, some commodity strategist are maintaining a relatively upbeat outlook for international crude.
“We expect continued OPEC restraint amid a seasonal uptick in demand to keep prices (Brent) supported around $70-75/b over the coming months,” wrote Amarpreet Singh, commodity research analyst at Barclays in a note dated May 23.
The bank does, however, acknowledge the risk of a worsening economic backdrop and trade:
“A sharper-than-expected slowdown in global economic activity growth due to protectionism and a higher trade-weighted USD are key downside risks to our price forecast,” the analyst wrote.
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