Oil prices slide 2% over glut forecast, China virus worries

Marco Green
January 24, 2020

"Crude inventories have ticked slightly lower in the last week, as a minor drop in imports has been offset by lower refining activity", Matthew Smith, director of commodity research at ClipperData.

U.S. West Texas Intermediate crude fell 2.8%, or $1.64, to settle at $56.74 per barrel. The last week registered 1.9 million barrels of loss in the total inventories for commercial petroleum.

Oil prices have been marginally supported after Libya's National Oil Corp on Monday declared force majeure on the loading of oil from two major oilfields after the latest development in a long-running military conflict.

The prices fall for the fourth consecutive day this Thursday and shed over 1.50%, as the sentiment around the black gold remains dampened by expectations of weakening oil demand, in the wake of rising concerns that the China coronavirus outbreak could hurt the global economic recovery. Libya has been producing about 1.2 million bpd recently.

ING said that spare OPEC capacity, which stands in excess of 3 million bpd, was reassuring the market. "Iraq is another producer vulnerable to production risk". But the International Monetary Fund said a U.S. Analysts were looking for a 1 million barrel draw in inventory.

Prices of oil in the USA declined as the crude inventories increased, the West Texas Intermediate (WTI) for March delivery dropped USD1.64 to set at USD56.74 per barrel on the New York Mercantile Exchange.

Further increasing the geopolitical risk premium on global oil prices, the US military action in Iraq in January 2020 increased uncertainty about potential disruptions to oil production and shipping in the Middle East. Weekly U.S. energy reports have been delayed a day this week in observance of the Martin Luther King Jr.

In a monthly report published Tuesday, the U.S. Energy Information Administration predicts further efficiency gains in shale oil drilling. Day holiday on Monday.

Other reports by Click Lancashire

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