Lower Worldwide Demand is Pressuring Crude and Fuel Prices
August 23rd, 2019
Crude oil and refined fuel product prices closed lower yesterday with RBOB gasoline leading the way down by 1.6% for the nearby futures trading month. The market yesterday was again focused on the lower world demand and the fact that there are currently ample supplies of crude oil around the globe.
Yesterday Norwegian bank DNB lowered their world oil demand growth for 2019 and 2020. DNB lowered their oil demand growth down 800,000 bpd down to 1.1 million bpd. They also lowered 2020 oil demand growth down to 1.1 million bpd from 1.6 million bpd in their forecast from last month. Due to this weaker oil demand outlook DNB also lowered their GDP outlook. They have forecasted that the market will be oversupplied by 200,000 bpd in 2020.
Traders are waiting for Jerome Powell to speak today after a 2-day Jackson Hole Economic Symposium. Any hint of a Fed interest rate cut next month could offer support to oil prices.
China this morning just released news that they will retaliate with some new tariffs of their own on US goods. These tariffs will be on another $75 billion worth of US good including autos. This news put pressure on stock futures and energy markets sold off after this headline hit the wire.
Rosneft, Russia’s state owned oil major has become the main trader of Venezuelan crude oil, shipping oil to buyers in China and India. Rosneft is not in breach of US sanctions, because it takes oil as part of debt servicing agreement after lending Caracas money in previous years.
Oil traders exited bearish options trades in US crude oil this week, after the market rapidly shifted to reflect tighter supplies at the Cushing, Oklahoma storage hub over the past month. As mentioned yesterday with new pipelines flowing out of the Permian Basin to the US Gulf Coast, shipments to Cushing, Oklahoma are expected to fall. Inventories have already declined for the seventh consecutive week, at a faster–than-expected rate.
Greek Prime Minister, Kyrikos Mitsotakis, said an Iranian tanker which the US wants seized is not heading toward Greece as it sail through the Mediterranean. The Adrian Darya was detained by Gibraltar after British forces seized it in July on suspicion of breaking sanctions on Syria but it was released last week.