Mubasher: Oil prices declined earlier on Thursday, contributing to the deep overnight losses, driven by a surprise build-up in US crude stockpiles and worries of recession as well as disappointing economic figures from China and Europe, Reuters reported.
By 7:42 am GMT, US Nymex crude futures ticked up by 0.02% to $55.24 per barrel (pb) after dropping by 3.3% on Wednesday, while global benchmark Brent futures fell by 0.25% to $59.33 pb, having shed 3% in the prior session.
A second weekly build-up in US oil inventories is intensifying the pressure on crude markets. The Energy Information Administration (EIA) stated that stockpiles rose by 1.6 million barrels to 440.5 million barrels, which came as a surprise to analysts surveyed by Reuters who expected a drawdown of 2.8 million barrels, as refineries scaled back their output.
Moreover, signals of a slowdown in global economic growth arose, with a number of negative data. July figures from China, including a slump in industrial output growth to more than 17-year low, pointed to a growing economic impact as the trade conflict with the US escalates.
In the same vein, worries, underpinned by tariff conflicts and Brexit uncertainty, took their heavy toll on European economies.
A drop in exports threw Germany’s economy into recession in the second quarter of 2019, while the broader Eurozone’s gross domestic product (GDP) rose at a slower pace.
In addition, the US Treasury bond yield curve inverted on Wednesday for the first time since 2007, raising the alarm that the world’s biggest economy may enter into a recession.
While these factors have put out recent optimism in oil markets, they raised the prospects that the world’s major producers could make their move to shore up prices.
The Organization of the Petroleum Exporting Countries (OPEC) has been generally withholding supplies since the beginning of 2017.
Saudi Arabia, OPEC’s de-facto leader, is set to scale back production further amid a sluggish global oil demand growth, traders told Reuters.
“Oil prices, though supported by OPEC-led production curbs, [...] face severe headwinds as traders swing between demand-side worries and supply curtailment policies,” Phillip Futures in Singapore analyst Benjamin Lu was quote by the news agency.
