Oil heads for 2-Month low as bleak demand signals proliferate

Source: By Robert Tuttle and Jacquelyn Melinek, Bloomberg, • Posted: Wednesday, October 2, 2019

  • Oil storage tanks in in Szazhalombatta, Hungary, on February 13, 2019. Photo: Bloomberg Photo By Akos Stiller. / © 2019 Bloomberg Finance LP
Photo: Bloomberg Photo By Akos Stiller. Oil storage tanks in in Szazhalombatta, Hungary, on February 13, 2019.

Oil fell to the lowest in almost two months as negative economic signals darkened the outlook for global energy demand.

Futures dropped 0.8% in New York on Tuesday. Manufacturing in the world’s largest economy has slumped and the World Trade Organization cut its forecast for commerce to a decade low. The bleak economic picture contrasted with a plunge in OPEC crude output last month driven almost entirely by crippling attacks on Saudi Arabian oil installations.

“Demand fears are overriding supply fears,” Phil Flynn, senior market analyst at Price Futures Group Inc., said by telephone.

Stocks fell and Treasuries rose as investors fled riskier assets including commodities and equities. Traders’ attention has turned to the U.S.-China trade war and its implications for global energy demand. High-level talks between the world’s two largest economies are expected to take place within weeks.

West Texas Intermediate for November delivery fell 45 cents to settle at $53.62 a barrel on the New York Mercantile Exchange, the lowest close since Aug. 8.

The U.S. benchmark has fallen 15% since reaching $62.90 on the first trading day after the Sept. 14 attacks that devastated Saudi oil output. In the meantime, the kingdom has surprised many observers with the swift pace of repairs and restoration.

Brent for December settlement fell 36 cents to close at $58.89 on the ICE Futures Europe Exchange. The global benchmark crude traded at a $5.39 premium to WTI for the same month.

Asian manufacturing sentiment remained mostly bleak in September due to the trade conflict and waning demand. The euro area’s manufacturing sector slumped last month.

In the U.S., the Institute for Supply Management’s factory index slipped to 47.8 in September, the lowest since June 2009. The figure missed all estimates in a Bloomberg survey that had called for an increase from August’s 49.1.

“In view of subdued global economic prospects and rising U.S. oil production, any concerns” about oil supply tightening have evaporated, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

–With assistance from Grant Smith and Sharon Cho.