Yemisi Izuora
Oil prices dropped on Thursday amid volatile currency and stock markets, and as analysts warned of an economic slowdown for 2019 just as crude supply is rising globally.
The U.S. West Texas Intermediate, WTI, crude oil futures were at $45.93 per barrel down 61 cents, or 1.3 per cent from their last settlement, while the International Brent crude futures were down 36 cents, or 0.7 per cent at $54.55 per barrel.
Markets were roiled by a more than 3 per cent crash of the U.S.-dollar against Japan’s yen overnight, and after U.S. tech giant Apple cut its sales forecast.
“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple chief executive Tim Cook said.
The slowdown in China and turmoil in stock and currency markets is making investors nervous, including in oil markets.
Investment bank Jefferies said in a 2019 opening note to clients and employees that the start of the year “doesn’t feel as firm, the future doesn’t feel as certain and optimistic, and the path forward does not seem as clear.”
The U.S. bank added that “markets are extremely volatile and virtually impossible to anticipate or navigate.”
Also, oil markets have also come under pressure from a surge in supply.
The U.S. crude production stood at a record 11.7 million barrels per day (bpd) in late 2018, making the United States the world’s biggest oil producer, while Russian output reaching a record of more than 11 million bpd in 2018.
Supply from Iraq, the number two producer in the Organization of the Petroleum Exporting Countries, OPEC, behind Saudi Arabia, is also up, with December exports at 3.73 million bpd, up from 3.37 million bpd in November.
With production rising and demand growth expected to slow, many analysts expect a global oil supply overhang to build in the first months of 2019.