Home News Commodities Crude oil prices under pressure from concerns about global economy

Crude oil prices under pressure from concerns about global economy

Crude oil prices do not find a single direction on Wednesday against the Chinese claims that the country will raise costs to halt the economic slowdown.

Crude oil

Share This On Social

Crude oil prices do not find a single direction on Wednesday against the Chinese claims that the country will raise costs to halt the economic slowdown that is compounding the financial markets. The futures on US crude oil WTI with delivery in March depreciated by 2.21% to 52.57 USD per barrel. The Brent variety, however, rose by 0.46% to 61.78 USD per barrel.

oil

The movement today is following a 2% drop in oil prices during yesterday’s session as global growth concerns have forced investors to look for assets that are perceived as safer, such as government bonds and gold.

A widespread slowdown in the economy is expected to lead to a decline in oil and fuel demand, which is exacerbating the price of energy resources.

Chinese finance ministry officials said on Wednesday that the government would increase budget spending this year to support the economy that registered its lowest growth rate last year since 1990.

Meanwhile, the Japanese Central Bank has decided to keep its extremely loose monetary policy unchanged. This happens after Japan announced that its exports in December 2018 had fallen by 3.8%. Meanwhile, crude oil imports to Japan in 2018 dropped to 3 million barrels per day, which is its lowest level since 1979.

The crude oil prices have, however, been backed up in recent days by the production cuts by the Organization of Petroleum Exporting Countries (OPEC). But whether OPEC’s efforts to avoid oversaturation will largely depend on the US oil production and the shale boom in the country. Crude oil production in the US jumped 2 million barrels per day in 2018 to an unprecedented 11.9 million barrels per day.

IEA: The real shale boom in the US is yet to come

The shale revolution in the US changed the global energy market and economy, but the increase in shale oil and gas production is underestimated, according to the Executive Director of the International Energy Agency (IEA), Fatih Birol.

Last year was published a wrong estimate of growth in shale oil and gas production in the United States. Instead of the expected 1.5 million barrels per day, the US production rose by 2.1 million barrels per day.

“Let’s take a special look at US shale oil in 2019, as I think some observers made false assumptions last year and underestimated growth in the US”, said Fatih Birol. “If anybody thinks we have seen the full impact of the shale revolution in the United States, then he or she is making a big mistake”, added he.

The Energy Information Administration report projected a rise in oil output from seven major US shale players by 62,000 barrels a day to 8.18 million barrels per day in the next month.

OPEC and its production allies have officially implemented a fresh round of supply cuts, which will see 1.2 million barrels per day removed from the market from the start of January.

Birol said that despite those cuts, prices in 2019 should face renewed pressure with Permian Basin output in western Texas and southeastern New Mexico set to ramp up. The director of the IEA added that unless there was a large geopolitical event, it would be very difficult to see prices nearing 90 USD per barrel — as the Brent crude benchmark did in October.