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Oil dips on demand worries despite OPEC cut extension

Tuesday, 02 July 2019 | 12:00

Oil prices slipped on Tuesday as concerns that the global economy could be slowing outweighed an agreement by producer club OPEC on Monday to extend supply cuts until next March.

Brent crude futures were down 18 cents, or 0.28%, at $64.88 a barrel by 0845 GMT.

U.S. crude futures for August were down 20 cents, or 0.34%, at $58.89 a barrel, after touching their highest in more than five weeks on Monday.

The Organization of the Petroleum Exporting Countries agreed on Monday to extend oil supply cuts until March 2020 as members overcame their differences to try to prop up the price of crude.

“It appears that the supply side of the oil equation is supportive for oil prices but demand concerns are forcing oil bulls to keep at least part of their gunpowder dry,” PVM analyst Tamas Varga wrote in a note.

OPEC is slated to meet with Russia and other producers, an alliance known as OPEC+, later on Tuesday to discuss supply cuts amid surging U.S. output.

Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend global output cuts until December 2019 or March 2020, and Saudi Energy Minister Khalid al-Falih said on Tuesday he was 100% confident of an OPEC+ deal.

Meanwhile, U.S. crude oil stockpiles were seen falling for a third consecutive week, a preliminary Reuters poll showed on Monday, also supporting prices. [nL4N2423SA]

Still, concerns of a weaker global economy denting oil demand growth capped price gains.

While the U.S. and China agreed at a recent Group of 20 leaders summit to restart trade talks, factory activity shrank across much of Europe and Asia in June while growth in manufacturing cooled in the United States weighed on oil prices.

Asian shares wobbled on Tuesday, U.S. Treasury yields fell and gold rebounded, while a tweet by U.S. President Donald Trump saying any trade deal with China would need to be “somewhat tilted” in favor of Washington also stoked doubt over prospects for a trade deal between the top two economies.

“Oil traders will now turn their attention to the economic data, as the weakening global activity and waning demand could again weigh on the sentiment”, Ipek Ozkardeskaya, senior market analyst at London Capital Group, said in a note.
Source: Reuters (Additional reporting by Jessica Jaganathan, editing by Louise Heavens)

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