Oil prices extend drops as trade wars fan fears of global economic slowdown; US firms hike crude production

Singapore: Oil prices fell more than 1 percent on Monday, extending losses of over 3 percent from Friday, when crude markets slipped to their biggest monthly losses in six months amid stalling demand and as trade wars fanned fears of a global economic slowdown. Front-month Brent crude futures were at $61.12. That was 87 cents, or 1.4 percent, below Friday’s close. US West Texas Intermediate (WTI) crude futures were at $52.91 per barrel, down 59 cents, or 1.1 percent from its last settlement. [caption id=“attachment_1973743” align=“alignleft” width=“380”] Representational image. Reuters[/caption] The drops followed price slumps of more than 3 percent on Friday, which made May the worst-performing month for crude futures since last November. “Oil prices slid on fresh trade worries after US President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, which is one of the largest US trade partners and a major supplier of crude oil,” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities, in a note on Monday. In a typical move for financial markets during times of uncertainty, gold on Monday rose to its highest level in over two months as investors pulled out of risky assets like oil and parked money in perceived safe havens like the precious metal. Edward Moya, a senior market analyst at futures brokerage OANDA in New York, warned “oil remains vulnerable” because of a weakening demand outlook for crude. “The US-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the US and Mexico raised the slower demand picture for the Americas,” he said. Barclays bank said in a note published last Friday that US March oil consumption “declined significantly year-on-year for the first time since September 2017 …(as) petroleum demand fell almost 370,000 barrels per day (bpd) year-on-year on weak consumption across the barrel.” Rising US supply US bank Goldman Sachs said in a note published on Sunday that “escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment”. Brent crude oil prices have dropped almost 20 percent from their 2018-peak in late April. “The magnitude and velocity of the move lower were further exacerbated by growing concerns over strong US production growth and rising inventories,” Goldman said. US energy firms this week increased the number of oil rigs operating for the first time in four weeks, and weekly production last stood at a record 12.3 million barrels per day (bpd).