Oil prices fell today amid a global economic slowdown that is starting to hit oil demand, triggering calls in producer club OPEC for supply cuts to be extended.
Brent crude futures, the international benchmark for oil prices, were at $60.88 at 0038 GMT on ICE Futures Europe. That was 40 cents, or 0.7%, below last session’s close.
U.S. West Texas Intermediate (WTI) crude futures were at $52.94 per barrel on the New York Mercantile Exchange, down 31 cents, or 0.6%.
Crude oil futures are now around 20% below their 2018 peaks reached in late April, Reuters reported.
Meanwhile, Saudi Energy Minister Khalid al-Falih has called recent volatility "unwarranted" and has said he expects OPEC to help to stabilize prices beyond the end global output pact that ends at the start of July. "We have previously stated our commitment to do whatever it takes to stabilize markets and we have delivered on those promises. And I am making that commitment again," Bloomberg cited him as saying.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that the dynamics of oil prices has recently been of a wave-like nature due to informational occasions. "At first, oil prices were increasing because Iran and Venezuela reset their exports, and now we see that the oil price is declining because the Americans have increased their shale oil production. Now the main factor is the trade war between China and the U.S. The logic of traders is quite simple here: if the trade war continues, the global economy will begin to slow down, therefore, futures should be sold," he said.
"It was news about this U.S.-China trade war that brought oil down from $70 to $60 a barrel. Traders are waiting for positive news to start buying futures again. Some news from Iran and Venezuela, for example, about a further output decline, may support prices and even push them up. Most likely, we are already close to the low point of this war, unless, of course, some new disturbing news from China and the United States comes," Igor Yushkov predicts.
A senior analyst of 'Uralsib', Alexei Kokin, agreed with Yushkov. "The decline in prices is caused by an aggravation of trade wars and the opening of new fronts. Last week there was an announcement that tariffs on Mexican goods will be introduced, India was excluded from the list of developing countries, and also the European Commissioner for Trade warned that duties on a number of European goods will be imposed in July," the expert.
"The market sees a threat of economic slowdown, which will affect the demand for oil. The inertia of these fears is so strong that any moves, for example, Saudi Arabia’s readiness to support prices, have little effect. The risk that oil prices will drop below $60 per barrel is quite real. If this or next week comes up with encouraging news about the U.S. relations with Mexico, the market may calm down a bit, but Washington’s principled readiness to use tariffs as a universal foreign policy tool scare the markets planty," Alexei Kokin concluded .
