Oil steady after fast-escalating concerns about global demand ignited a quick and strong selloff that drove Brent below $70 a barrel for the first time in more than two years.
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Published on 10 Sep 2024 • Last updated 38 minutes ago • 2 minutes of reading
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(Bloomberg) – Oil steady after rapidly-escalating concerns about global demand ignited a quick and strong selloff that drove Brent below $70 a barrel for the first time in more than two years.
The global benchmark has fallen nearly fivefold so far this quarter on concerns that slowing growth in the US and China, major consumers, will dampen consumption at a time of strong and expanding supply. Market metrics – including the shape of all futures curves – indicate conditions are quickly becoming less tight.
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The decline in oil has forced OPEC + to delay the increase in output, causing investors to worry that additional barrels could still be brought to the market closer to 2025. On Thursday, the International Energy Agency will issue its monthly outlook, including estimates for world supply and demand.
Still, the slump will be a tailwind for central banks around the world when they press the front of the fight against inflation, with the Federal Reserve expected to start reducing interest rates next week given the easing of price pressures and signs of softening the labor market. It will also be a boon for countries that rely on crude oil imports to power their economies, such as China and Japan.
Brent – which is just above $ 69 a barrel in Asian trade – suffered a turbulent session on Tuesday as prices slid by more than 3% in a fresh wave of selling pressure after a sharp decline last week. It ticked modestly higher on Wednesday after the American Petroleum Institute estimated U.S. commercial stockpiles fell by about 2.8 million barrels last week, according to people familiar with the figures. Official data is scheduled for Wednesday.
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Traders are also tracking the progress of Hurricane Francine, which is expected to make landfall in Louisiana later Wednesday. With Chevron Corp and Shell Plc among the companies taking the measures, federal officials said the total amount of oil shut down represented nearly a quarter of crude oil production in the Gulf of Mexico. Additionally, eight refineries may be in the system’s path.
Executives, traders and hedge funds gathered in Singapore this week for the Asia Pacific Petroleum Conference were generally bearish on the outlook for crude oil. Analyst Goldman Sachs Group Inc. Daan Struyven said the bank expected the market to flip to glut as soon as November or early December.
Brent’s instant spread – the difference between the two closest contracts – has narrowed to 38 cents a barrel in the retreat. While it is still a bullish pattern – with the closest price trading in the premium to the next in order – compared to the gap of 92 cents last month.
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