Oil continues slide as markets fear further economic slowdown

Brent stayed below $60 per barrel despite reassurances from Saudi Arabia and the UAE

FILE PHOTO: An offshore oil platform is seen in Huntington Beach, California September 28, 2014. Brent oil prices fell more than $2 a barrel to less than $88 on Monday, its lowest since 2010, after key Middle East producers signalled they would keep output high even if that meant lower prices. Brent oil prices have tanked by nearly 25 percent since June as ample supply coincided with weak demand, raising the possibility that the Organization of the Petroleum Exporting countries could cut output. Picture taken September 28, 2014. REUTERS/Lucy Nicholson/File Photo

Topaz Energy and Marine is an offshore support vessel provider to the global energy industry. Reuters

Aug 12, 2019

Oil slid further as trading resumed and markets remained concerned about trade war tensions between the US and China, despite reassurances from Saudi Arabia to balance the market.

Oil was trading at $58.22 (Dh213.81) per barrel at 3.57pm UAE time on Monday as the threat of a continued showdown between the world’s two biggest economies roiled markets.

The US-China trade war kept Brent in a tight band between $60 and $70 per barrel over the last two months. Getty

Oil steadies as Saudi Arabia and the UAE signal efforts to balance the markets

Oil enters bearish territory as Brent remains below $60

Demand fears have crept into the market as the US signalled further escalation in its tit-for-tat trade war with China, by levying a 10 per cent tax on $300 billion worth of Chinese imports on August 1.

Brent lost 7 per cent of its value the same day while West Texas Intermediate, the benchmark tracking North American crude grades, registered its steepest single-day decline in four and half years.

The move caused an immediate rout in global stocks and commodities, as markets worried about a further slowdown in global economic activity as a result of the escalation in the trade war.

Last week, China allowed its currency to slide below the key threshold of 7 to the dollar, prompting Washington to label Beijing a currency manipulator. Asia’s largest economy retaliated by strengthening its currency and ending US agricultural imports.

The move has hurt already weakening oil demand growth forecast, which has prompted institutions such as the International Energy Agency to revise their estimate for the second half of the year to 1.1 million barrels per day (bpd) and 1.3 million bpd for 2020, cautioning more corrections could be expected. This constitutes a downward revision of 100,000 bpd for this year and 50,000 bpd for the next.

Opec+, the alliance undertaking supply corrections of up to 1.2 million bpd since the beginning of the year until next March, stepped in when prices slid past $60 per barrel. Saudi officials told Bloomberg on the condition of anonymity that the country would do all it takes to balance the market. The UAE will host the next technical meeting of the group on September 12 in Abu Dhabi. The country’s energy minister Suhail Al Mazrouei took to Twitter to say the UAE was also committed to Opec+ action, while reassuring the markets that demand remained healthy amid what he said was an “overreaction” by the market.

Opec producer Kuwait also affirmed its commitment to cuts on Monday, with its oil minister Khaled Al Fadhel saying its compliance was close to 160 per cent in July.