Oil prices fell on Monday as the focus of traders seems to have shifted from the supply concerns (due to the US sanctions on Iran) to a weaker demand outlook as well as rising oil output in both Russia and Saudi Arabia.
Global benchmark Brent crude futures fell 28 cents to settle at $77.34 a barrel, while WTI crude oil futures also fell 55 cents to settle at $67.04.
Broader sell-off in global equity markets and a strengthening US dollar also seeped into the oil markets.
The US dollar is strengthening on the back of an impressive US economic growth. US GDP grew by 3.5 percent in Q3, lifting the USD index to near 10-week high.
The downward trend in global equity markets is also weighing on oil. On Monday, Asian markets, particularly China’s blue-chip index tumbled 2.5 percent.
US stocks also fell, with the S&P 500 falling as much as 11 per cent from its all-time high before staging a recovery. The Dow Jones Industrial Average also closed one percent lower.
Last week, crude prices dropped for a third straight week.
“Market focus has switched from the impact of US sanctions on Iranian supply to a weaker demand outlook – due to a combination of lower global growth, trade tensions and emerging market currency weakness – and rising oil output in both Russia and Saudi Arabia,” NBK noted in its latest weekly report.
At the last week’s Future Investment Initiative (FII) 2018 conference in Riyadh, Saudi Energy Minister Khalid Al-Falih said Saudi Arabia’s oil output could be raised by 1 or 2 million barrels per day (mbd) by using its spare capacities in order to stabilize the market.
“We don’t rule out the Kingdom’s oil output will exceed the current level by 1-2 bpd going forward,” he said in a panel discussion, adding, “We’ll need to make judicious use of our spare capacities," the minister said.
Going forward the outlook looks positive believe analysts.
“Oil consolidates around $67 and momentum seems to be shifting higher and a move higher from current levels will bring prices back to the $68.50 and $70 areas,” Konstantinos Anthis, Head of Research at ADS Securities wrote in his market commentary on Monday.
Write to Sunil Kumar Singh at sunil.kumar@argaamplus.com
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