Warrington Shaw - Oil Falls as Global Economic Slowdown Fears Grow

Warrington Shaw - OPEC will need to maintain production cuts in order to rebalance oil market in 2019.

Earlier this week, China reported that its economy had grown at the lowest rate in almost three decades with GDP reaching only 6.6 percent last year.

The International Monetary Fund downgraded growth forecasts for the global economy for this year and next, citing China’s slowing economy and risks from Brexit as reasons for the gloomier predictions.

In spite of an increasingly negative economic outlook, Warrington Shaw analysts say oil prices have received a much-needed boost from OPEC led production cuts. Towards the end of December last year, OPEC and its allies decided to extend output cuts in order to prevent an oversupply problem. It was decided that oil production would be cut by 1.2 million barrels per day.

But as the threat to global growth increases and concerns were fueled by recent news that US officials had canceled trade discussions with their Chinese counterparts this week, oil prices slumped.

On Tuesday, Brent crude futures fell 0.8% and WTI crude futures were down 0.7%.

Analysts at Warrington Shaw say cooling manufacturing activity in the world’s second largest economy is affecting the demand for oil and fears of a global economic slowdown were fueling concerns about future demand for the commodity.

But Warrington Shaw analysts say that based on the recent forecasts of the International Energy Agency which predicted that demand for oil would increase to 1.4 million barrels per day this year, the oil market could rebalance during 2019.

In order for the oil market to rebalance, Warrington Shaw analysts say OPEC and its allies will need to continue to implement the existing production restrictions.

Source: Warrington Shaw


Categories: Energy

Tags: oil market rebalancing, OPEC led production cuts, Warrington Shaw, WarringtonShaw

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