Oil prices drop on concern over U.S. economy
Oil prices fell on Thursday for the first time in three days after San Francisco Federal Reserve President Mary Daly sounded a note of concern about the strength of U.S. economy.
Brent crude was down 31 cents, or 0.5%, at $60.18 a barrel by 0638 GMT while U.S. crude was down 18 cents, or 0.3%, at $55.60 a barrel. Oil prices rose around 1.5 percent in the previous session.
Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, along with the potential hit to oil demand, are keeping prices in check.
Daly said on Thursday she believes the U.S. economy has “strong” momentum, but uncertainty and a global growth slowdown are having an impact.
Daly was speaking to reporters after a speech in Wellington, New Zealand and said she was in “watch and see” mode in assessing the need for another U.S. interest-rate cut.
U.S. President Donald Trump said on Monday he believed China was sincere about wanting to reach a trade deal, but concerns arose on Tuesday after China’s foreign ministry declined to confirm a telephone call between the two countries on trade.
“Trade tensions (are) hanging like a dark cloud threatening to rain over oil prices,” said Jeffrey Halley, senior market analyst at OANDA.
The market shrugged of a big drop in U.S. inventories, which fell last week by 10 million barrels, compared with analysts’ expectations for a decrease of 2.1 million barrels, the Energy Information Administration said.
U.S. gasoline stocks
The crude drawdown confirms “that OPEC supply cuts are effectively working by depleting U.S. reserves,” said Stephen Innes, managing partner at Valour Markets.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers have been restraining supply for most of the period since Jan. 1, 2017. The alliance, known as “OPEC+”, in July renewed the pact until March 2020.
U.S. weekly crude production also rose 200,000 barrels per day to a new record at 12.5 million bpd in the week to Aug. 23.
Morgan Stanley has lowered its oil price forecasts for the rest of the year citing a weaker economic outlook, faltering demand and higher shale output that could offset OPEC’s efforts to support the market.
Source: Reuters (Reporting by Aaron Sheldrick; editing by Simon Cameron-Moore)