Oil falls on increased U.S. rig count, China industrial slowdown

By Henning Gloystein

SINGAPORE (Reuters) – Oil prices fell by 1 percent on Monday after U.S. companies added rigs for the first time this year, a signal that crude output may rise further, and China, the world’s second-largest oil user, reported additional signs of an economic slowdown.

oil futures were at $53.13 per barrel at 0543 GMT, down 56 cents, or 1 percent, from their last settlement.

International futures were at $61.03 a barrel, down 61 cents, or 1 percent.

High U.S. crude oil production, which rose to a record 11.9 million barrels per day (bpd) late last year, has been weighing on oil markets, traders said.

In a sign that output could rise further, U.S. energy firms last week raised the number of rigs looking for new oil for the first time in 2019 to 862, an additional 10 rigs, Baker Hughes energy services firm said in its weekly report on Friday.

(GRAPHIC: U.S. oil production & drilling levels – https://tmsnrt.rs/2Tm4u4I)

Beyond oil supply, a key question for this year will be demand growth.

Oil consumption has been increasing steadily, likely averaging above 100 million bpd for the first time ever in 2019, driven largely by a boom in China.

However, an economic slowdown amid a trade dispute between Washington and Beijing is weighing on fuel demand-growth expectations.

Earnings at China’s industrial firms shrank for a second straight month in December on sluggish factory activity, piling more pressure on the world’s second-largest economy, which reported the slowest pace of growth last year since 1990.

“Persistent weakness seen in Chinese economic data has raised downside risks … of lower crude oil imports by Beijing in 2019,” said Benjamin Lu of Singapore-based brokerage Phillip Futures.

China is trying to stem the slowdown with aggressive fiscal stimulus measures.

But there are concerns that these measures may not have the desired effect as China’s economy is already laden with massive debt and some of the bigger government spending measures may be of little real use.

The increased U.S. supply, the country is now the world’s largest oil producer, and the economic slowdown are weighing on the oil price outlook.

“We expect U.S. crude oil prices to range between $50-$60 per barrel in 2019 and about $10 more per barrel for Brent,” Tortoise Capital Advisors said in its 2019 oil market outlook.

However, Tortoise added that oil prices would be supported above $50 per barrel as it was “very clear that Saudi Arabia will no longer be willing to accept these lower oil prices”.

The Organization of the Petroleum Exporting Countries (OPEC), de-facto led by Saudi Arabia, started supply cuts late last year to tighten markets and buoy prices.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.