Oil headed for its weakest quarter since late last year as fears over a global economic slowdown overshadowed an unprecedented attack on Saudi Arabia’s key energy facilities.
Brent futures have slumped about 8% since the end of June after a brief spike earlier this month due to drone strikes on the Abqaiq processing facility and Khurais oil field. The Saudis are restoring supply quicker than expected, and the subsequent sell off underscores investors’ focus on weakening oil demand from slower economic growth and the U.S.-China trade war.
“Oil supply remains quite adequate and the U.S. has a lot of oil,” said Phil Streible, senior market strategist at R.J. O’Brien & Associates. “The economic picture might be weakening a bit, so demand is softening with that.”
Political tensions have abated somewhat since the Sept. 14 strike on Saudi Arabia as the parties involved take a cautious approach. The kingdom’s Crown Prince Mohammed Bin Salman warned that war between his country and Iran would bring a “total collapse of the global economy” and should be avoided. He added he prefers non-military pressure to stymie Iranian ambitions. The U.S. and Saudi Arabia have blamed Iran for the attacks, though the Persian Gulf nation denies it.
Brent for November settlement, which expires Monday, fell 96 cents to $60.95 a barrel on the London-based ICE Futures Europe Exchange at 11:18 am in New York. Prices are up 0.9% this month. The more-active December contract was down 60 cents at $60.44. The global benchmark crude traded at a premium of $5.71 to West Texas Intermediate.
WTI for November delivery lost 63 cents to $55.29 a barrel on the New York Mercantile Exchange. Prices are little changed this month, and down 5.4% for the quarter.
Yemen Cease-Fire
Saudi Arabia has agreed to a limited cease-fire in several areas of Yemen including the capital Sana’a, which is controlled by Iran-backed Houthi rebels, a Yemeni government official said last week, easing tensions in the region. Still, some hostilities continue after the Houthis, which claimed responsibility for the Saudi attacks, said they had captured soldiers from the kingdom during an operation near the border of the countries.
The oil market has also been driven by the prolonged clash between Washington and Beijing over trade, and the knock-on effects on economic growth. Their dispute has already almost halved oil-consumption growth, Citigroup Inc. said earlier this month.
The world’s two largest economies will head into another round of high-level trade talks following China’s week-long national holidays starting Oct. 1. Beijing said it would continue to open up its financial markets amid reports that the U.S. is considering restrictions on fund flows to China. - Bloomberg -