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Oil ends lower Tuesday on renewed global growth fears

By Myra P. Saefong / MarketWatch

Petroleumworld 01 22 2019

Oil futures settled lower Tuesday, under pressure after a warning from the International Monetary Fund and weak economic data out of China underlined concerns about global economic growth and energy demand.

Prices, however, finished off the session's lows, finding some support from data released just ahead of the settlement that suggested a slowdown in U.S. shale oil production. The Energy Information Administration estimated a rise of 62,000 barrels a day in February shale oil output, from a month earlier, to 8.179 million barrels a day. The agency had forecast an increase of more than double that for January from December.

West Texas Intermediate crude for February delivery CLG9, -1.91%  fell $1.23, or 2.3%, to settle at $52.57 a barrel on the New York Mercantile Exchange — off the session low of $51.80. The contract expired at the day's settlement. March WTI CLH9, +0.04% which became the front-month contract, settled at $53.01, down $1.03, or 1.9%. March Brent LCOH9, -1.80%  lost $1.24, or 2%, to end at $61.50 on ICE Futures Europe.

“Oil prices are under pressure due to new economic concerns. The IMF yesterday lowered its forecast for global economic growth this year, particularly because of the less dynamic growth expected in Europe. The NDRC, the state planning agency in China, sees a risk of a further cooling of the Chinese economy,” wrote analysts at Commerzbank, in a note.

The IMF on Monday said it expects the global economy to grow 3.5% in 2019 , down from a previous forecast of 3.7% in October and a growth rate of 3.7% in 2018. The fund cited growing trade tensions and rising U.S. interest rates.

Feeding those tensions, U.S. officials canceled preparatory trade talks this week with two Chinese vice ministers, ahead of a higher-level meeting in Washington later this month, according to a Financial Times report Tuesday . Also, early Monday, China reported its economy expanded by 6.6% in 2018 , the slowest pace since 1990.

Read: Here's what really worries investors about China's slowdown

Most U.S. financial markets were closed Monday for the Martin Luther King Jr. Day holiday. Brent crude rose 4 cents Monday in London.

The Commerzbank analysts noted the International Energy Agency late last week confirmed its forecast for global oil demand despite an increasingly gloomy economic outlook, calling for demand to increase by 1.4 million barrels a day in 2019 thanks to the positive impact of lower prices.

“If demand develops as the IEA predicts, the oil market will become gradually rebalanced during the course of the year. For this to happen, OPEC+ will need to consistently implement the agreed production cuts. OPEC has now published a detailed breakdown of the contribution required from each country,” they said.

In other energy trading, March natural-gas futures NGH19, +0.74%  dropped nearly 12.7% to $3.04 per million British thermal units, continuing to see high volatility on the back of changing weather forecasts.

“The recent weekend saw U.S. gas demand levels hit their highest point of 2019 to date, but a turn towards more normal conditions to start the week has been sufficient for adding significant price pressure,” said Doug May, risk manager at Schneider Electric.

February heating oil HOG9, +0.00%  was off 0.8% at $1.901 a gallon, while February gasoline RBG9, +0.21%  dropped 3.5% to $1.402 a gallon.


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Reporting by Myra P. Saefong from MarketWatch.

01 22 2019 20:14 GMT

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