MARKET WATCH: Oil price benchmarks drop on economic slowdown

Crude oil benchmarks dropped on New York and London markets Aug. 22, which analysts attributed to expectations of rising oil supplies amid a slowing world economy and lower growth in oil demand.

Crude oil benchmarks dropped on New York and London markets Aug. 22, which analysts attributed to expectations of rising oil supplies amid a slowing world economy and lower growth in oil demand.

In a research note, DNB Markets said it no longer expects a slight supply deficit for 2020 but anticipates an oversupply of 200,000 b/d, assuming the Organization of Petroleum Exporting Countries and other major producers keep oil production-cut targets through Dec. 31, 2020.

Helge Andre Martinsen, DNB senior oil analyst in Oslo, said in a research note that the oil market for the second half of this year and into 2020 “is set to be dominated by the global economic slowdown, escalating US-China trade war, resilient non-OPEC production growth, and OPEC’s battle to continue to balance the market.”

DNB Markets reduced its 2019 oil demand growth estimate to 800,000 b/d from 1.1 million b/d and its 2020 oil demand growth to 1.1 million b/d, down from a previous estimate of 1.6 million b/d.

In addition, DNB Markets lowered its oil price forecast for Brent’s 2019 average to $66/bbl, down from an earlier forecast of $73/bbl and cut its 2020 forecast to $64/bbl from $75/bbl. It cited a downward revision to its global gross domestic product outlook “and thus weaker oil demand growth.”

Energy prices

Light, sweet crude oil on the New York Mercantile Exchange for September delivery declined 33¢ to $55.35/bbl on Aug. 22 while the October contract also decreased 33¢ to $55.16/bbl.

The NYMEX natural gas price for September dropped 1¢ to a rounded $2.16/MMbtu.

Ultralow-sulfur diesel for September declined nearly 2¢ to $1.84/gal. The NYMEX reformulated gasoline blendstock for September decreased 2¢ to a rounded $1.67/gal.

Brent crude for October decreased 38¢ to $59.92/bbl. The November contract dropped 36¢ to settle at $59.50/bbl.

Gas oil for September decreased $7 to $565/tonne on Aug. 22.

The average for OPEC’s basket of crudes for Aug. 22 was $60.50/bbl, down 16¢.

Contact Paula Dittrick at pdittrick@endeavorb2b.com.

More in Economics & Markets