Investing.com – Economic worries, the Achilles heel of oil bulls, are rearing their heads again as U.S. crude tries to make a clear break of the mid-$50 trading range.
New York-traded West Texas Intermediate crude and London’s Brent oil slid as much as 1% for a second day in a row Tuesday as the Institute of Supply Management reported a in U.S. services sector activity for January, missing and increasing worries of demand on a global scale.
was down 86 cents, or 1.6%, at $53.70 per barrel by 1:23 PM ET (18:23 GMT), extending Monday’s 1.3% loss that came despite U.S. crude’s surge to November highs of $55.75.
, the global oil benchmark, slipped by 49 cents, or 0.8%, to $62.02 per barrel. It lost 0.4% in the previous session after rallying earlier to 2019 highs of $63.63.
Adding to the gloomy services sector estimate, another ISM data on Monday showed an unexpected fall in for U.S.-made goods in November that reflected sharp declines in demand for machinery and electrical equipment.
WTI rallied 3% last week in response to a plunge in Saudi crude exports, upbeat U.S. jobs data for January, the Federal Reserve’s decision to leave raise interest rates unchanged and U.S. sanctions on Venezuelan oil.
But worries about little progress in U.S.-Sino trade talks despite the Trump administration’s zeal to announce a deal brought back familiar headwinds to oil. With China being the second-largest economy and the biggest oil importer, its importance to the crude trade cannot be understated.
The about-20% recovery in crude prices this year also suggest that U.S. oil drilling, which is biased toward higher prices, could spike again. The latest reading on the U.S. rig count published by industry firm Baker Hughes showed oil rigs dropping by 14 units last week to a nine-month low of 847. Still, that could reverse easily if WTI continues edging toward $60.
Tuesday’s trading in crude was also sluggish as the market awaited weekly supply-demand data on oil from the U.S. Energy Information Administration. The EIA will be releasing its dataset for the week ended Feb. 1 at 10:30 AM ET (15:30 GMT) on Wednesday. The American Petroleum Institute, an industry group, will meanwhile issue at 4:30 PM on Tuesday of what the EIA numbers could be.
Analysts expect the EIA to cite a higher of 2.18 million barrels versus the previous week’s rise of 919,000.
were projected to have jumped by 1.6 million barrels against a previous slump of 2.235 million.
were expected to have fallen by about 1.81 million barrels versus the previous decline of 1.12 million.
“We get the API report tonight and how that comes out could be a major factor” to price direction for the rest of the week, said Phil Flynn, analyst at The Price Futures Group brokerage in Chicago.
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Source: Investing.com
