The oil market was rocked just weeks ago by a major attack on Saudi Oil infrastructure that saw 5.7 million bpd taken offline, but looking at oil prices, you’d never know it. Oil prices fell early on Thursday to their lowest level since early August as mounting evidence of a global economic slowdown and rising U.S. oil inventories more than offset all the price gains from last month’s attack on Saudi oil infrastructure.
Oil prices are now lower than they were just before the September 14 attacks on critical Saudi oil facilities, after the Kingdom was quick to reassure the market in the past weeks that no oil shipment would be skipped and production capacity would be restored. The market, however, turned decisively bearish this week with a string of economic data and forecasts showing that global economic growth is slowing down.
“We see the global economy going through a gradual, synchronized slowdown,” David Lipton, First Deputy Managing Director at the International Monetary Fund (IMF), said on Tuesday.
Also on Tuesday, the World Trade Organization (WTO) slashed its trade growth forecasts for 2019 and 2020, citing “escalating trade tensions and a slowing global economy” and macroeconomic risks “firmly tilted to the downside.”
On Wednesday came the weekly inventory report from the Energy Information Administration, which showed an inventory build of 3.1 million barrels for the week to September 27, more than analyst expectations for a relatively modest build of 1.57 million barrels, and contrary to the American Petroleum Institute (API) estimate of a large crude oil inventory draw of 5.92 million barrels.
“The oil market continues to grind lower, with ICE Brent now trading well below US$58/bbl- which is 4.5% below where the market was trading prior to the Saudi attack. Negative macro data this week, with the US ISM manufacturing report falling to a 10-year low, has not helped,” Warren Patterson, ING’s Head of Commodities Strategy and Senior Commodities Strategist Wenyu Yao, said on Thursday.
By Tsvetana Paraskova for Oilprice.com
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