WTI Crude: Oil steadies as Saudi, Kuwait signals offset demand fears
WTI Crude: Oil prices were little changed on Monday as expectations that producers would continue to reduce global supplies due to the US-China trade war.
Oil prices were little changed on Monday as expectations that major producers would continue to reduce global supplies ran into worries about sluggish growth in crude demand due to the US-China trade war. International benchmark Brent crude settled at $58.57 a barrel, up 4 cents. West Texas Intermediate (WTI) futures settled at $54.93, up 43 cents.
Investors were torn between forecasts of slowing global oil demand growth and chatter about renewed efforts by major producers to curtail output and support prices, analysts said.
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The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have agreed to cut 1.2 million barrels per day (bpd) since January 1.
Kuwait was "fully committed" to the OPEC+ agreement, Oil Minister Khaled al-Fadhel said, adding that Kuwait has cut its own output by more than required by the accord.
He said fears of a global economic downturn were "exaggerated," and said global demand for crude should pick up in the second half, helping reduce the surplus in oil inventories gradually.
Analysts said in a sign that de-facto OPEC leader Saudi Arabia intends to support prices, state-run Saudi Aramco is ready to launch what could be the world`s largest initial public offering.
The Saudi government will decide when the IPO will take place based on its perception of "what would be the optimum market condition," senior Aramco executive Khalid al-Dabbagh said in an analyst call.
The official said Saudi Aramco has signed a letter of intent with India`s Reliance to potentially buy a stake in its refining and petrochemicals business.
"The Saudis will need a higher price for oil for its IPO, and this confirms they`ll do whatever it takes to get oil prices up," said Phil Flynn, an analyst at Price Futures Group in Chicago.
Analysts said more reductions were needed to support prices as forecasters and government agencies issue gloomy predictions for the global economy and oil demand growth.
The economic outlook has deteriorated worldwide as the trade dispute between the United States and China escalates, Germany`s Ifo economic institute said in its quarterly survey of nearly 1,200 experts in more than 110 countries.
"It`s going to take the market far longer to come back into balance, which has forced OPEC and non-OPEC producers to continue with their production cuts," said Andy Lipow, president at Lipow Oil Associates in Houston.
The International Energy Agency (IEA) said on Friday that mounting signs of an economic slowdown had caused global oil demand to grow at its slowest pace since the financial crisis of 2008.
Tensions between the United States and Iran were also seen contributing to firming oil prices, analysts said.
Iranian Foreign Minister Javad Zarif said the launch of a U.S. maritime security mission in the Persian Gulf has turned the region into "a matchbox ready to ignite because America and its allies are flooding it with weapons."
Much of the world`s oil passes through Strait of Hormuz near the Persian Gulf. The U.S. security mission began after explosions damaged six tankers in May and June, and Iran seized a British-flagged tanker the following month.
Iranian officials "are saying it`s a narrow passage area and the U.S. is going to stir up geopolitical problems," said Bill Baruch, an oil trader at Blue Line Futures in Chicago. "That helped oil."
A weakening dollar <.DXY> also propped up oil prices as investors feared the trade war would slow U.S. economic growth, analysts said. A softer greenback makes dollar-denominated crude cheaper for foreign buyers.
On Friday, the U.S. Commodity Futures Trading Commission said hedge funds raised their net long positions in U.S. crude futures and options in the week to Aug. 6.
It was a signal some investors are "trying to pick the bottom," said Robert Yawger, an analyst at Mizuho in New York.
"They took the opportunity to get in," Yawger said. "The spec(ulator) community appears to want to trade these lows."
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