Oil loses ground after US rate cut disappoints

Tokyo — Oil prices skidded on Thursday, dropping for the first time in six days, after the US Federal Reserve dampened hopes for a string of interest rate cuts and Sino-US talks ended without apparent progress towards resolving a bitter trade dispute.

Brent crude futures, the international benchmark, fell 62 cents, or 1%, to $64.43 a barrel by 4.05am GMT, having fallen more than $1 earlier in the session. US West Texas Intermediate (WTI) crude was down 67 cents, or 1.2%, at $57.91 a barrel, also having dropped more than a $1 earlier.

The drops came despite a bigger-than-expected decline in inventories in the US and a drop in crude production among Opec members, along with Libya cutting exports, typically bullish drivers for the market. But US output rose in a market that remains well supplied.

The Federal Reserve cut interest rates on Wednesday, but against expectations the head of the US central bank said the move might not be the start of a lengthy series of cuts to shore up the economy against risks including global economic weakness.

“Supply is plentiful and demand growth is showing signs of weakening globally because of trade conflicts, Brexit and other events that tend to potentially weaken economic growth and, hence, oil demand,” said Victor Shum, senior partner at IHS in Singapore.

“There’s a lot of oil out there. US output is growing strongly and in addition to that there is enough spare capacity in Saudi Arabia alone to offset any significant supply disruptions.”

A Reuters monthly poll showed oil prices are expected to be range-bound near current levels in 2019 as slowing economic growth and the protracted trade dispute between the US and China curb demand.

Meanwhile, negotiators from the US and China, the world’s two biggest economies, wrapped up a round of trade talks on Wednesday without visible signs of progress and put off their next meeting until September.

US crude oil stockpiles fell for the seventh straight week, declining to their lowest levels since November even as production rebounded and net imports increased, the Energy Information Administration said on Wednesday.

Crude inventories fell 8.5-million barrels in the week ended July 26, far exceeding analysts’ expectations for a decrease of 2.6-million barrels.

But output rebounded to 12.2-million barrels per day (bpd), near recent levels, from 11.3-million bpd a week earlier.

Oil output among Opec members hit an eight-year low in July as a further voluntary cut by top exporter Saudi Arabia deepened losses caused by US sanctions on Iran and outages elsewhere in the group, a Reuters survey found.

Libya’s state-owned National Oil Corp declared force majeure on loadings of crude from the country’s largest oil field on Wednesday.

Reuters

Source: businesslive.co.za