Oil dips most in a month as China slowdown signals demand drop
NEW YORK (Bloomberg) -- Crude skidded to its worst loss in a month as disappointing corporate profit forecasts stoked concern about the economy, bruising a market already anxious about booming American oil supplies.
Futures dropped 3.2% in New York on Monday, joining a slide in equities after microchip-maker Nvidia Corp. and heavy-equipment giant Caterpillar Inc. warned of slowing growth in China and elsewhere. Saudi Arabia’s pledge to pump oil “well below” its self-imposed limit did little to mollify traders.
Oil has advanced 15% this year as the Organization of Petroleum Exporting Countries and allies curbed output to ease glut concerns. Nevertheless, price gains have been capped by record American output, expanding stockpiles and the U.S.-China trade war. Talks between the world’s two biggest economies later this week may provide the catalyst for crude to break through its recent narrow trading range.
“This is a broader risk-off move,” said Ryan McKay, a commodities strategist at TD Securities in Toronto. The earnings reports are “a bad sign for demand in China and for global growth overall, and that’s a big worry for crude markets these days.”
West Texas Intermediate crude for March delivery fell $1.70 to settle at $51.99/bbl on the New York Mercantile Exchange for its biggest one-day loss since Dec. 27.
Brent for March settlement broke below $60 for the first time in two weeks, dropping $1.71 to $59.93 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at an $7.94 premium to WTI.
Saudi Arabia, the world’s biggest crude exporter, expects to reduce output again in February and will pump below the production limit it agreed to in the OPEC deal for six months, Energy Minister Khalid Al-Falih said in a Bloomberg Television interview in Riyadh. The U.S. in particular is a target of the cuts since it’s “way oversupplied” with domestic crude, he said.
Crude was already down after oilfield services provider Baker Hughes released data on Friday showing U.S. drilling activity rose for the first time this year. The number of U.S. rigs targeting oil rose by 10 to 862 last week, Baker Hughes data showed.
Adding to the downdraft, political tensions eased somewhat over the weekend in OPEC member Venezuela. President Nicolas Maduro abandoned his decision to sever diplomatic ties with the U.S. A small number of American diplomats in Venezuela will remain, Maduro said in an interview with CNN-Turk, even as he criticized U.S. Secretary of State Michael Pompeo, who urged other nations to “pick a side” between Maduro and his opponents.
