Storage tanks are seen at Ecopetrol's Castilla oil rig platform, in Castilla La Nueva, Colombia. File photo/Reuters
Oil prices fell by around 1% on Monday, extending losses of over 3% from Friday, when crude markets slipped to their biggest monthly losses in six months amid stalling demand and as trade wars fanned fears of a global economic slowdown.
Front-month Brent crude futures were at $61.28 at 0659 GMT. That was 71 cents, or 1.1%, below Friday’s close.
US West Texas Intermediate (WTI) crude futures were at $53.09 per barrel, down 41 cents, or 0.8%, from their last settlement.
The drops followed price slumps of more than 3% on Friday, which made May the worst-performing month for crude futures since last November.
“Oil prices slid on fresh trade worries after US President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, which is one of the largest US trade partners and a major supplier of crude oil,” Mithun Fernando, investment analyst at Australia’s Rivkin Securities, said in a note on Monday.
In a typical move for financial markets during times of uncertainty, gold on Monday rose to its highest level in over two months as investors pulled out of risky assets like oil and parked money in perceived safe havens like the precious metal.
“Traders are increasingly pricing in a prolonged trade war hitting the global economy,” said Jasper Lawler, head of research at futures brokerage London Capital Group.
“The US-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the US and Mexico raised the slower demand picture for the Americas,” said Edward Moya, senior market analyst at OANDA, another futures brokerage.
Barclays bank said in a note published last Friday that US March oil consumption “declined significantly year-on-year for the first time since September 2017 ...(as) petroleum demand fell almost 370,000 barrels per day (bpd) year-on-year on weak consumption across the barrel.”
RISING US SUPPLY
US bank Goldman Sachs said in a note published on Sunday that “escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment”.
Brent crude oil prices have dropped almost 20% from their 2018-peak in late April.
“The magnitude and velocity of the move lower were further exacerbated by growing concerns over strong US production growth and rising inventories,” Goldman said.
US energy firms this week increased the number of oil rigs operating for the first time in four weeks, and weekly production last stood at a record 12.3 million barrels per day (bpd).
That’s pushed up commercial US crude oil inventories, which have increased by 8.4% since the start of the year to 476.5 million barrels.
“With an increasingly uncertain macro outlook as well as rising US production and large available core-OPEC spare capacity helping offset declining supply from Iran and Venezuela, we instead expect prices will likely remain around our 3Q forecasts and current levels, albeit with still high price volatility,” Goldman said.
The bank’s Brent price forecast for the third quarter of this year was $65.50 per barrel.
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