Oil dips as markets remain cautious on trade concerns
Oil prices dipped on Monday as sentiment remained cautious after a plunge in financial markets last week triggered worries that global growth may be slowing.
Front-month Brent crude oil futures were at $77.56 a barrel at 0430 GMT, 6 cents below their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $67.59 a barrel, flat from their last settlement.
Sentiment among investors remained cautious after hefty losses last week.
“Cooling economic conditions and symptoms of softer international trade have exacerbated bearish conditions as (the) growth outlook dims,” said Benjamin Lu of brokerage Phillip Futures in Singapore.
Singapore-based ship tanker brokerage Eastport said stock prices were falling amid policy uncertainty, rising interest rates and disappointing earnings from some companies.
Financial market turmoil may “weigh on investment and consumer spending, reducing trade flows and ultimately hitting demand,” it said.
Hedge funds slashed their bullish wagers on U.S. crude in the latest week to the lowest level in more than a year, the U.S. Commodity Futures Trading Commission said on Friday.
The speculator group cut its combined futures and options position in New York and London by 42,644 contracts to 216,733 in the week to Oct. 23, the lowest level since September 2017.
There were also signs of a slowdown in global trade, with rates for dry-bulk and container ships – which carry most raw materials and manufactured goods – coming under pressure.
On the supply side, however, oil markets remain tense ahead of looming U.S. sanctions against Iran’s crude exports, which are set to start next week and are expected to tighten supply, especially to Asia which takes most of Iran’s shipments.
The tight market in Asia is visible in the low amount of unsold crude oil stored on tankers on waters around Singapore and southern Malaysia, the region’s main oil trading and storage hub.
Just four stationary supertankers are currently filled with crude oil, according to Refinitiv Eikon ship tracking data.
That’s down from around 15 a year ago, and from 40 in mid-2016 during the peak of the supply glut.
In North America, however, there is no oil shortage as U.S. crude oil production has increased by almost a third since mid-2016 to around 11 million barrels per day.
Production is set to rise further. U.S. drillers added two oil rigs in the week to Oct. 26, bringing the total count to 875, the highest level since March 2015, Baker Hughes energy services firm said on Friday.
More than half of all U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, the country’s biggest shale oil formation.