Oil prices fall on economic slowdown and rising US output

Singapore/London — Oil prices fell on Tuesday to their lowest since January on signs that an economic slowdown is starting to dent energy demand and as Russia’s top oil producer said it opposed extending joint cuts with oil cartel Opec until the end of the year.

Front-month Brent crude futures were at $60.78 at 10.30am GMT, 50c, or 0.85%, below the last session’s close. Brent fell as low as $60.2 a barrel earlier, the lowest level since January 2019. US West Texas Intermediate (WTI) crude futures were at $52.80 a barrel, down 45c, or 0.85%, from their last settlement.

Oil futures are about 20% below 2019 peaks reached in late April, with May posting the sharpest monthly declines since November.

Other energy prices, such as for coal and gas, are also being hit hard by the economic downturn. Financial traders sold off energy markets amid growing concerns about the outlook for the world economy amid the trade war between the US and China.

“The prolonged trade war has sparked fears of a global economic slowdown as well as weaker oil demand,” tanker brokerage Eastport said on Tuesday. 

“Slowing economic activity now threatens to derail our base case of robust cyclical [oil] demand growth,” Bank of America Merrill Lynch said in a note.

To prevent oversupply and prop up the market, the Middle East dominated Opec, together with some allies including Russia, has been withholding supply since the start of the year. The group plans to decide later in June or in early July whether to continue withholding supply.

Saudi energy minister Khalid al-Falih said on Monday that a consensus is emerging among producers to continue working “to sustain market stability” in the second half of the year.