Oil drops as global economic concerns grip market

Posted February 08, 2019

Further gains in the price of USA crude oil are possible as the recovery that began in late December past year shows no sign of reversing just yet.

Crude futures fell earlier after an industry report suggested a larger rise in crude inventories, while concerns about the impact on global supplies of US sanctions on Venezuela faded.

Guaido's team is planning for a post-Maduro government with an emergency scheme to supply fuel domestically, given widespread shortages across Venezuela, Goicoechea said.

The oil price came under pressure earlier in the day following weekly data from the US Energy Information Administration on Wednesday that showed an unwelcome increase in stocks of crude oil.

U.S. West Texas Intermediate (WTI) crude was down 13 cents at $53.53.

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"Basically it's a pretty supportive report", said Phil Flynn, oil analyst at Price Futures Group in Chicago.

US crude futures were down 75 cents, or 1.39 per cent, at $53.26.

Following a US decision to impose sanctions on Venezuela's oil industry last week, Guaido and the Trump administration have sought to appoint a new board of directors for Citgo. "Additionally, the builds in crude (+1.3 million barrels) and gasoline stocks (+0.5 million barrels) were less than anticipated".

"Anything out of the State of the Union that hints at the U.S".

Yet some investors believe these concerns may be overblown, in light of the decline in OPEC production and a squeeze on supply from Iran and Venezuela from USA sanctions.

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Also dampening market sentiment still were worries about weaker global economic growth and the US-China trade dispute.

Countering the rising United States crude output and inventories are voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at tightening the market and propping up prices.

That focuses yet more attention on the outcome of U.S. -China trade dispute. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

"We believe that financial markets may be overestimating the risks of a global recession", said Jean-Pierre Durante, Head of Applied Research at Pictet Wealth Management.

Saudi Arabia, the world's top oil exporter, told OPEC it had pumped 10.24 million barrels per day (bpd) in January, two OPEC sources told Reuters, exceeding requirements agreed in the supply pact.

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Adding to the bearish sentiment, CNBC reported that a meeting between President Donald Trump and his Chinese counterpart Xi Jinping was "highly unlikely" before the March 1 deadline set by the USA for reaching a trade deal. Senior U.S. and Chinese officials are poised to start another round of talks next week.