Oil Mixed on Monday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Intercontinental Exchange Brent futures moved mixed Monday morning after comments from an official from the Organization of the Petroleum Exporting Countries suggesting the market was correcting higher collided with ongoing downside pressure from investors' concerns over the prospects for global economic growth and oil demand.

In morning trading, Nymex January West Texas Intermediate futures were down $0.89 at $50.29 barrel (bbl), while ICE February Brent crude lost $0.28 at $60.04 bbl. Nymex January ULSD futures walked back 0.22 cents to $1.8435 gallon, while the January RBOB contract shed 1.04 cents to $1.4280 gallon.

During Monday morning trade, United Arab Emirates energy minister Suhail al-Mazrouei sought to inject optimism into the oil market with his comments that oil futures were in correction following an agreement reached by OPEC earlier this month that everyone would abide. Despite the OPEC agreement cutting 1.2 million barrels per day (bpd), 800,000 bpd by OPEC and 400,000 bpd by Russia and nine non-OPEC oil producers, investors continue to question whether the reduction would enough to rebalance the market next year when demand growth might slow.

According to the International Energy Agency's monthly Oil Market Report released last week, oil demand growth in 2019 could come under pressure from slowing economies and weakening currencies while the U.S. dollar strengthens.

This year, "Demand will grow by 1.3 million barrels per day, although there are signs that the pace is slackening in some countries as the impact of higher prices lingers. As far as non-OPEC supply is concerned, our estimate for growth is revised slightly up to 2.4 million barrels per day," said IEA.

OPEC supply in 2019 which is set to decline year-on-year could fall more than currently expected from tougher sanctions on Iran, the economic collapse in Venezuela and security concerns in Libya. Several wire services reported last week on the shut-in of Libya's 300,000 bpd Sharara and adjacent 73,000 bpd El Feel oil fields by armed militia that continue to pose a security threat to Libya's largest oil fields.

However, investors' focus in Monday morning trading remained on sluggish growth in China and the European Union that pressured oil futures. Late last week, poor indicators for industrial and manufacturing output from China and flat industrial growth in the EU, including contraction in France triggered a selloff in equities. The Dow Jones Industrial Average lost nearly 500 points on Friday.

A slowing Chinese economy is partly attributed to the U.S.-China trade dispute, with both countries currently holding a truce that runs through March 1 to reach a new trade agreement. Trade negotiations between President Donald Trump and China President Xi Jinping came under investors' scrutiny, amidst mixed signals from China on trade concessions. Many analysts indicate negotiations will take longer than the current 90-day truce in their trade dispute to reach an agreement, consequently increasing market volatility.

Concerns over higher interest rates and the potential adverse effect on the U.S. economy have also placed downward pressure on oil futures, while the Federal Reserve is scheduled to make an announcement on interest rates Wednesday afternoon.

Liubov Georges can be reached at liubov.georges@dtn.com