WTI, Brent Futures Lower on Demand

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange West Texas Intermediate and Intercontinental Exchange Brent futures were lower Thursday morning on concerns over slowing oil demand growth in 2019 after the release of the monthly outlook from the International Energy Agency.

In morning trading, NYMEX January WTI were down $0.40 at $50.72 bbl, while ICE February Brent crude dipped $0.12 at $60. NYMEX January ULSD futures lost 1.16 cents to $1.8391, while the January RBOB contract gained 0.8 cents to $1.4291 gallon.

Early session selling followed monthly statistics released by Paris-based IEA that showed expected oil demand growth in 2019 could be offset by slowing economic growth and weakening currencies.

For this year, "Demand will grow by 1.3 mb/d although there are signs that the pace is slackening in some countries as the impact of higher prices lingers," said IEA.

IEA continues to project world oil demand would increase 1.3 million bpd this year to 99.2 million bpd, with year-on-year growth in global oil consumption forecast at 1.4 million bpd to 100.6 million bpd for 2019.

"Some of the support provided by lower prices will be offset by weaker economic growth globally, and particularly in some emerging economies," said IEA.

IEA projects output from producers not part of the Organization of the Petroleum Exporting Countries will decline by 500,000 bpd less in 2019 than previously envisioned. According to IEA's monthly Oil Market Report released this morning, after year-on-year growth of 2.4 million bpd to about 60.3 million bpd in 2018, non-OPEC supply is expected to grow by 1.5 million bpd in 2019 following last week's agreement by OPEC and participating non-OPEC producers to reduce their output by 1.2 million bpd. Ten non-OPEC countries led by Russia account for 400,000 bpd of the supply cut. Mandated cuts in Canadian production also factor into lower projected non-OPEC supply next year.

"The serious build-up of stocks arising from logistical bottlenecks in Alberta led the provincial government to act very decisively to curb output. The initial cutback of 325 kb/d for three months to allow blockages to ease is a significant development," said IEA.

OPEC crude oil production increased 100,000 bpd in November to 33.03 million bpd, with output by Saudi Arabia and the United Arab Emirates reaching record highs that more than offset a sharp decline in Iranian production.

Concern over world oil demand was the focus of traders during Thursday's morning session despite news that negotiations between the United States and China were advancing during their 90-day truce, with reports indicating China is considering a plan that reduces tariffs on U.S. automobile imports from 40% to 15% and plans to import more U.S. products, including soybeans.

Equity markets advanced amid optimism the world's two largest economies would reach an agreement and avoid an escalation in their trade dispute. The Dow Jones Industrial Average was up 100 points Thursday morning.