Crude Oil drops 1% as US supply surges

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Oil drops one percent as US supply surges, economic outlook weakens

Crude oil prices, US job data & economic slowdown trending points

  • Disappointing US job growth renewed concerns of a slowing economy and dragged crude oil price down
  • US job growth almost stalled in February, mounting fears of slowdown and a weaker demand for oil
  • US oil supply surges further, unsettling the market, although both crudes remain well-supported on OPEC production cut

Oil falls as global growth worry whispers

On Friday, the 8thof March, 2019, while US oil supply had been surging, the job growth almost halted in February, adding only 20,000 new jobs in February, pointing towards a steep slowdown. Following a surge in the US supply, the market got unsettled on Friday (March 8th) and Brent crude faltered as much as 0.8 percent to settle at $65.74 per barrel. Concomitantly, the US west Texas intermediate crude oil futures fumbled more than 1 percent to reside at $56.07 per barrel, after falling as much 2 percent in the intra-day trading. Despite today’s (March 8th) dwindling, the US crude managed to end the week with a weekly gain of 0.5 percent.

US crude daily price chart

US crude daily price chart

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As beforementioned, the US job growth remained almost stalled last month, with the economy adding only 20,000 new jobs, while other data also displayed a contraction in the US payroll activity in constructions and other sectors. The report released on Friday (March 8th), had dragged down both stocks and oil futures. Market also took a hit from yesterday’s (March 7th) comment of ECB president Mario Draghi, who had been quoted saying that the European economy was facing a period of continued weakness.

As there had been a conventional connection between equity market and oil future, if the equity market continues to dip further, it will ultimately drag down the energy prices lower and it was what happened in today’s (March 8th) market. Both European and US economy growth slowed, while China had been posting a basket of grievous data. Altogether, the global stocks had been falling for five straight day, and alongside the equities had also dragged down the crude oil price on mounting growth fears.

Specially, oil demand in China is something on which investors kept usually looking for market sentiments, and in February, China’s export fall more than 21 percent from a year earlier, which also raised concerned over the oil futures, since China had still been largest importer of oil in the world. China’s crude import stayed at 10 million barrels per day, while any data which could convey a message of slowing Chinese economy ought to weigh on the crude oil price.

Besides, over the supply side, the oil had been receiving support from output cuts led by the OPEC nations and Saudi Arabia’s crude oil production dropped about 10.136 million barrels per day in February, which actually is keeping the crudes well supported above their critical levels.

Apart from that, the US sanctions on Venezuelan and Iranian crudes had also supported crude oil price so far this year, meanwhile the US crude production had been increasing intransigently. US crudes production had raised more than 2 million barrels per day since the first quarter of 2018 to 12.1 million barrels per day, making United States the world’s biggest oil producer.

Russian, US and Saudi crude productions

Russian, US and Saudi crude productions

The chart above has been showing a rapid rise in the US crude production boosted mostly by onshore shale production, which had recently got benefitted by the Chevron and Exxon Mobil.

Bottom Line

At the Friday’s (March 8th) weekly closure, the US crude had been at $56.27 per barrel, while the UK crude prices were residing at $65.68 a barrel. Both of the crudes appeared to be well-support as mentioned before by large supply cut by the Saudi Arabia and other OPEC nations.

Looking ahead, the UK crude is highly unlikely to fall below $63.30-$64.30 level in a near future, while the US crude would likely to be surfing above $54.30-$55.30 territory. Next week may have opened an opportunistic buying position again for the crudes, although crude oil prices seem to remain range-bound for the next couple of days, when market opens next week.

Read more on crude oil here

[Disclaimer: The content of this article is personal opinion and should not be considered as investment advice or suggestion towards any trading activity.]

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