This archive report was first published on 22 October 2019.
Oil prices declined on Monday, October 21, 2019, as concerns about economic growth and ample global supplies outweighed bullish signals from Europe.
Global benchmark Brent crude fell by 57 cents to $58.85 (Sh6,061) a barrel by 0944 GMT, while US West Texas Intermediate crude oil declined by 39 cents to $53.39 a barrel.
The decline in oil prices came as US and Chinese trade negotiators worked on finalizing a Phase 1 trade deal text for their presidents to sign next month, aiming to resolve a trade war that has slowed global economic growth over the last year.
However, tensions escalated as China sought $2.4 billion (Sh247 billion) in retaliatory sanctions against the United States for non-compliance with a WTO ruling in a tariffs case dating back to the Obama era.
Stephen Brennock, an oil broker at PVM, noted that a rebound in upside potential for oil prices seemed unlikely at this stage, given the lack of bullish catalysts. He stated, “Only a meaningful U.S.-China trade agreement or deeper OPEC cuts will change the negative status quo, neither of which seem to be forthcoming.”
The Organisation of the Petroleum Exporting Countries (OPEC), Russia, and other oil producers agreed in December to cut supply by 1.2 million barrels per day (bpd) from the start of this year. However, Russia failed to meet its supply reduction commitment in September due to an increase in natural gas condensate output as the country prepared for winter.
Additionally, talks between OPEC members Kuwait and Saudi Arabia to resume oil production from joint fields in the Neutral Zone between the two countries, with a capacity of 500,000 barrels per day, could lead to more supply returning to the market.
China's economic growth slowed to six per cent year-on-year in the third quarter, its weakest in 27-1/2 years. However, a 9.4 per cent year-on-year increase in China's refinery throughput for September signalled that petroleum demand remained robust.
