Oil dips as traders fret about global growth

Singapore — Oil prices eased from 2019 peaks on Friday as economic growth concerns weighed on sentiment, pausing a three-month rally driven by Opec-led supply cuts and US sanctions against Iran and Venezuela.

Brent crude oil futures were at $67.72 a barrel at 4.19am GMT, down 14c, or 0.2%, from their last close. Brent hit a four-month high of $68.69 a barrel the day before.

US West Texas Intermediate (WTI) futures were at $59.84 a barrel, down 14c, or 0.2% from their last settlement. WTI also hit a 2019 peak at $60.39 the previous day.

“Global economic growth still remains a concern,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

Economic growth has slowed across Asia, Europe and North America, potentially denting fuel consumption.

Oil prices this year have been propped up by supply cuts by the Opec and non-affiliated allies such as Russia, often referred to as Opec+.

Canadian investment bank RBC Capital Markets said oil was “still below the fiscal breakeven level in a number of Opec countries”, meaning that many producers have an interest in further propping up the market.

“With the driver of the Opec bus, Saudi Arabia, showing no signs of wavering in the face of renewed pressure from Washington, we believe that Opec is likely to extend the deal for the duration of 2019 when they next assemble in Vienna in June,” RBC said.

RBC said Russia was only a reluctant partner in the supply cuts, but would “ultimately opt to preserve the arrangement and retain a leadership role of a 21-nation group that accounts for around 45% of global oil output”.

Beyond Opec and Russia’s supply policy, oil prices have also been boosted by US sanctions on Opec-members Iran and Venezuela.

Iranian crude oil shipments have averaged just over 1-million barrels a day in March, down from 1.3-million barrels a day in February and a 2018 peak of at least 2.5-million barrels a day in April, before the US sanctions were announced.

Venezuelan crude oil production has also dwindled amid US sanctions and an internal political and economic crisis, plunging from a high of more than 3-million barrels a day at the start of the century to not much more than 1-million barrels a day currently.

Further price increases have also been crimped by a jump of more than 2-million barrels a day in US crude oil production since early 2018 to a record 12.1-million barrels a day, making the US the world’s biggest producer ahead of Russia and Saudi Arabia.

Soaring US output has resulted in increasing exports, which have doubled over the past year to more than 3-million barrels a day.

The International Energy Agency (IEA) estimated that the US would become a net crude oil exporter by 2021.

Reuters