Key Highlights :
Oil prices were little changed in early Asia trade on Thursday as investors weighed demand concerns over a global economic slowdown against an expected fall in supply from Saudi output cuts. Brent crude futures dipped 1 cent at $76.94 a barrel at 0110 GMT, while the US West Texas Intermediate crude futures rose 5 cents at $72.58 a barrel. Both benchmarks settled up by about 1% on Wednesday, supported by Saudi Arabia’s plans for deep output cuts, though price gains remain capped by rising US fuel stocks and weak Chinese export data.
The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers, led by Russia, have agreed to reduce output by 1.2 million barrels per day from May 1 to shore up prices. Saudi Arabia, the de-facto leader of OPEC, has said it would reduce its output by an additional 1 million barrels per day in June.
Despite the expected fall in supply, oil prices are being weighed down by concerns over demand. Global economic growth is slowing, with the International Monetary Fund (IMF) cutting its growth forecast for 2019 to 3.3%, the weakest since the financial crisis of 2008. The IMF also warned that the US-China trade war could further drag on global economic growth.
The latest data from the US Energy Information Administration (EIA) showed that US crude oil stockpiles fell last week, though fuel product inventories grew. Gasoline inventories climbed by 2.7 million barrels in the week, the EIA said, higher than analyst expectations for a 880,000 barrel rise. Distillate stockpiles rose by nearly 5.1 million barrels in the week, exceeding analyst predictions of a 1.3 million barrel rise. The larger-than-expected build in US fuel inventories raised concerns over demand from the world’s top oil consumer, especially as travel was expected to have grown more during the Memorial Day weekend.
Citi analysts said on Thursday that even a 1 million barrel/day cut looks unlikely to underpin a sustainable price increase. “Both OPEC and IEA forecasts have had an air of wishful thinking about accelerating demand growth by year-end,” the analysts added.
In conclusion, oil prices remain unchanged in early Asia trade on Thursday as the expected fall in supply from Saudi output cuts is offset by weak demand due to slowing global economic growth and rising US fuel stocks.