Oil falls most in 3 weeks on global slowdown fears
(Bloomberg) – Oil fell the most in three weeks as disappointing economic data showed new fears of slowing global growth.
West Texas Intermediate futures in New York dropped 1.6% Friday, paring the week’s gain to less than 1%.
Weaker than expected manufacturing data from Germany and France cast fresh doubts on Europe’s economic outlook, dragging equities down.
The US Treasury yield curve inverted Friday morning for the first time since the financial crisis in 2007, a move is widely seen as a reliable harbinger of the recession in the US.
“Have the fundamentals all of a sudden gone badly today? Probably not,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto.
“The fundamentals on the supply side of the equation look pretty much as they did yesterday so I think a lot of this is profit taking and a response to this pretty severe downturn in risk appetite.”
Oil has gained about 30% this year, and a two week rally saw prices climb above $60 a barrel in New York on Wednesday for the first time in 2019.
Prices have been supported by OPEC and its allies reaffirming their commitment to supplying cutbacks and ongoing disruptions in Venezuela and Iran have also squeezed supplies.
But the concerns over slowing global growth and the ongoing US-China trade dispute have also capped rallies.
“The French and German PMIs were both just abysmal,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York.
“We were trading at US$60 until the Eurozone data started coming out so it’s definitely a perception on demand and has nothing to do with supply-side economics this morning.”
WTI for May delivery lost 94 cents to settle at US$59.04 a barrel on the New York Mercantile Exchange. Brent for May settlement fell 83 cents to settle at US$67.03 a barrel on the London-based ICE Futures Europe exchange.
The S&P 500 index was down 1.8% as of 3.45 pm in New York, on pace for its worst single-day since Jan 3.
Surprise drop
Until Friday, oil had been supported by bullish news on the supply side.
The US Energy Information Administration showed crude stockpiles dropped by the most since July last week, defying analysts’ forecasts for a 1.75 million-barrel increase.
However, they are still near the five-year average for this time of the year, suggesting growing shale output still risks undermining OPEC and its partners’ efforts to cap production.
Saudi Arabian Energy Minister Khalid Al-Falih said OPEC+ remains committed to curbing output when the Joint Ministerial Monitoring Committee met on Monday.
Still, Russia and Iraq, the coalition’s other major suppliers, suggested the group should monitor the market until May or June before making a decision on extending the cuts through the year as developments in Venezuela and Iran may influence supply.
