Oil Slides on Economy Fears, Stuck in Tightest Range Since 2017

Oil fell as a weakening outlook for the global economy and rising crude stockpiles in the U.S. signaled that markets will remain comfortably supplied.

Futures in New York retreated as much as 2.7 percent. They have held this week in the narrowest range since December 2017 as traders balance concerns over fuel demand and economic growth with OPEC’s aggressive supply cuts. U.S. crude inventories surged far more than expected last week, according to government data.

Crude prices this year climbed more than 25 percent through mid-February as the Organization of Petroleum Exporting Countries and its partners curbed output, and American sanctions on Iran and Venezuela also tightened supplies. But the rally has stalled since then. The European Central Bank cut economic forecasts, China reduced its goal for expansion and the OECD lowered its global projections. The U.S.-China trade spat is adding to the uncertainty.

“Global risk sentiment took a blow” after the ECB’s economic outlook and has dragged oil lower, said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen. “In addition, the market is still weighing whether the strong inventory build last week is a sign of weak demand.”
 

West Texas Intermediate for April delivery declined as much as $1.52 to $55.14 a barrel on the New York Mercantile Exchange and was at $55.38 at 8:26 a.m. local time. Prices are down 0.8 percent this week.

Brent for May settlement fell $1.51, or 2.3 percent, to $64.79 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude’s premium over WTI for the same month narrowed to $9.06 a barrel.

Economic Slump

The ECB cut its euro-area growth forecast for the year by the most since the advent of its quantitative-easing program four years ago. Even then, some of its policy makers thought the outlook was too optimistic. Earlier this week, the Paris-based Organization for Economic Cooperation and Development slashed its estimate for world economic growth to 3.3 percent in 2019, downgrading almost every Group of 20 nation’s economy.

Meanwhile, reflecting the toll of the ongoing trade war, China’s exports fell in February and imports weakened as well, according to customs data. Days earlier, the world’s biggest oil importer had lowered its economic growth target for the year.

“Worries over global economic growth prospects continue to be a big cap on oil prices,” said Vandana Hari, founder of Vanda Insights, a Singapore-based provider of oil market analysis. OPEC’s monthly report will “help shape market sentiment next week, with the market paying particular attention to any changes in global demand-growth forecasts.”

Other oil market news Norway took a partial step in divesting oil and gas stocks in its massive $1 trillion wealth fund, approving the sale of smaller exploration companies while sparing the biggest producers such as Royal Dutch Shell Plc and Exxon Mobil Corp.  China’s crude oil imports rose 2 percent from the previous month to 10.27 million barrels a day in February, according to Bloomberg calculations based on customs data Friday. That’s close to the record highs in the final quarter of 2018. Mexico’s oil exports are getting heavier as its light crude production declines and sanctions on Venezuela leave a supply void. In the first week of March, Mexico’s scheduled crude shipments reached about 19 million barrels, of which 17 percent was Talam, the country’s extra heavy crude grade.