Crude oil prices slip as economic slowdown worries outweigh supply fears

Marco Green
June 20, 2019

In recent days, despite the escalating U.S. -Iran standoff after last week's attacks on two oil tankers in the Gulf of Oman, oil market participants had turned their attention to signs of weakening oil demand growth and slowing economic activity in the face of a possible protracted trade war between the world's two biggest economies.

However, Moya said OPEC and their allies are at a critical juncture as plans to extend production cuts may prove hard as they are unable to reach a consensus on when to meet. "Our respective teams will begin talks prior to our meeting", President Trump tweeted on Tuesday morning. Trump has said he would meet with Xi at the summit, although China has not confirmed the meeting.

"Oil prices fell further into bear market territory after USA factory and housing data showed the world's largest economy is slowing down faster than expected", he said in a research note today.

Fears of a confrontation between Iran and the United States have mounted since last Thursday when two oil tankers were attacked, which Washington has blamed on Tehran. Iran has denied involvement.

Trump would consider using military force to prevent Iran from gaining a nuclear weapon but left open the question if it involved protecting oil supplies, he told Time magazine in an interview published on Tuesday.

Acting U.S. Defense Secretary Patrick Shanahan announced on Monday the deployment of about 1,000 more troops to the Middle East for what he said were defensive purposes, citing concerns about a threat from Iran.

Market participants also await a meeting between the Organization of the Petroleum Exporting Countries and other producers including Russian Federation, a group known as OPEC+, to decide whether to extend a production cut agreement that ends this month.

The group has been considering since last month moving the date of their policy meeting in Vienna to July 3-4 from June 25-26.

Oil prices slipped more than 1% today as signs of an economic slowdown amid worldwide trade disputes began to outweigh supply fears stoked by attacks on oil tankers in the Gulf of Oman last week.

OANDA Corp senior market analyst Edward Moya said the ongoing trade war is starting to ebb away at the United States market while uncertainty will remain until the G20 summit is convened at the end of the month.

Prices have fallen around 20% since a 2019 high reached in April, in part due to concerns about the U.S.

Still, Brent was on course to register a weekly decline of more than 1.5% and WTI crude fell 2.7% on the week.

Official estimates are due to be released Wednesday.

Other reports by Click Lancashire

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