Economic doom and gloom remain the order of the day, so little wonder that hedge funds and other money managers spent the last week of September and the first part of October selling down their oil futures positions.
After a series of attacks on tankers in or near the Strait of Hormuz and in the Red Sea this year, vessel seizures, and then the major strike on the key Saudi oil facility of Abqaiq, it appears that nothing short of a conflict directly affecting at least one major Middle Eastern oil producer will drive up the price of oil.
OPEC production was down 1.6 million b/d in September from August, the lowest level since November 2003, but the price of Brent crude is back below $60/barrel.
Economic pessimism
The International Monetary Fund’s (IMF) October World Economic Outlook confirmed the uncertain outlook. The world economy is now forecast to grow at 3.0% in 2019, 0.3% lower than the IMF’s April projection. There are few signs that the economic situation has hit rock bottom and is entering a recovery phase. Further downgrades are still possible.
In particular, the Fund noted that manufacturing activity has weakened substantially to levels not seen since the financial crisis of 2008/09, although the service sector remains relatively resilient. The OECD’s Composite Leading Indicator continues to deteriorate, reaching 99.06 in August, notching up 20 continuous months of decline.
The Fund sees growth of 3.4% in 2020…
