LONDON/SINGAPORE/NEW YORK/ VIENNA: Oil prices drifted lower on Tuesday, as weak global data raised concerns about future demand for the commodity despite a positive boost from Opec’s decision to extend supply cuts until next March. Brent crude futures LCoc1 for September delivery were trading down 15 cents, or 0.2%, at $64.91 a barrel by 0311 GMT after dipping to $64.66 earlier.
Brent climbed more than $2 a barrel on Monday before paring gains later in the day.
US crude futures for August CLc1 were down 25 cents, or 0.4%, at $58.84 a barrel, after touching their highest in over five weeks on Monday. After 2-1/2 years of production cuts, the effects of rolling over production cuts is losing steam, said Edward Moya, senior market analyst at OANDA in New York, adding that markets remained nervous about demand. The trade war is not likely to get resolved any time soon and while central banks globally are expected to deliver fresh stimulus in the coming months, economic activity is continuing to trend lower.
OPEC and its allies led by Russia are set to extend oil output cuts until March 2020 on Tuesday to try to prop up the price of crude as the global economy weakens and US production soars.
The alliance, known as OPEC+, has been reducing oil supply since 2017 to prevent prices from sliding amid increasing competition from the US, which has overtaken Russia and Saudi Arabia to become the world’s top producer.
Benchmark Brent crude has climbed more than 25% so far this year after Washington tightened sanctions on OPEC members Venezuela and Iran, causing their oil exports to drop. But fears about weaker global demand as a result of a US-China trade spat have added to the challenges faced by the 14-nation Organization of the Petroleum Exporting Countries.
Brent was trading flat on Tuesday at around $65 per barrel after OPEC approved the supply-cut extension the previous day. Monday’s OPEC meeting will be followed by talks with its allies on Tuesday. The gathering is due to start after 0800 GMT. Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend the existing OPEC+ pact and continue to cut combined production by 1.2 million barrels per day, or 1.2% of world demand.
Oil prices could stall as a slowing global economy squeezes demand and US oil floods the market, a Reuters poll of analysts found. Saudi Energy Minister Khalid Al-Falih said on Monday he was growing more positive about the global economy after a G20 meeting of world leaders over the weekend.
The global economy in the second half of the year looks a lot better today than it did a week ago because of the agreement reached between (the United States and China) and the truce they have reached in their trade and the resumption of serious trade negotiations, Falih said. The meeting on Tuesday will also discuss a charter for long-term cooperation between OPEC and non-OPEC producers.