CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange nearest to delivery and the Intercontinental Exchange Brent contract settled lower for the third time this week, erasing Wednesday's advance as concern over slowing economic growth reemerged on bearish data from Germany, with oil futures further pressured by developments in Libya and a rallying U.S. dollar.
NYMEX March West Texas Intermediate futures settled at $52.64 per barrel (bbl), down $1.37, with ICE April Brent down $1.06 to $61.63 bbl, with both contracts settling at 1 1/2-week lows on the spot continuous charts. May Brent settled at parity with April delivery, while spot-month Brent ended at an $8.99 bbl premium to March WTI, a three-week high.
NYMEX March ULSD futures moved off a $1.8687 gallon four-day low to settle down 1.17 cents at $1.9005 gallon, with March RBOB futures settling at a one-week spot low of $1.4258 gallon, down 3.33 cents.
The U.S. dollar again rallied, reaching a 96.455 high in index trading, the strongest value for the currency since Jan. 2, as the U.S. economy continues to outperform economies elsewhere. The dollar again advanced as evidence of a slowing global economy mounted, including from Germany, where industrial production slipped 0.4% in December compared with expectations for a 0.9% uptick and after a 1.3% decline in November. It was the fourth consecutive month in which industrial output in Europe's strongest economy declined, while down 4.0% against the comparable year-ago period. Germany's industrial production contracted 1.5% in the fourth quarter and 1.7% in the third quarter, meeting the definition of recession for the sector.
Germany's export driven economy has been caught in the crossfire from the U.S.-China trade dispute, which continues to hang over global commodity and equity markets like the Sword of Damocles. China's economic growth has slowed sharply amid the barrage of tariffs on its imports to the United States, which are set to increase from 10% to 25% on $200 billion of those imports on March 2.
U.S. Treasury Steven Mnuchin and U.S. Trade Representative Robert Lighthizer will meet with their counterparts in Beijing next week for another round of talks. While Washington and Beijing have spoken of progress in negotiations, National Economic Council Director Larry Kudlow said "a pretty sizable distance" remains between the two countries' positions. Selling accelerated on news U.S. President Donald Trump said he would not meet with Chinese President Xi Jinping ahead of the March 1 deadline to reach a deal before tariffs increase, which in January said was necessary before he would agree to a trade agreement.
The Dow Jones Industrial Average was down 220 points in late trading, with the S&P 500 Index sliding 1.0%.
Banks lowered their price forecast for WTI and Brent this year according to a survey by the Wall Street Journal, because of concern over economic growth in the second half of 2019, lowering their outlook for WTI from $63 bbl in December to $60 bbl and for Brent from $69 bbl to $67 bbl.
The banks surveyed point to price support from production cuts by the Organization of the Petroleum Countries, Russia and nine other non-OPEC oil producers for the first half of 2019, with some indicating the cuts would likely balance the global oil market.
Oil futures were boosted by media surveys of OPEC crude production in January, with S&P Global Platts reporting a 970,000 barrel-per-day (bpd) decline from December to 30.86 million bpd -- the lowest output rate since March 2015.
That support was diminished on reports the Libyan National Army seized control of the 315,000 bpd El Sharara oilfield, the OPEC nation's largest, which had been controlled by armed insurgents demanding better wages since December. Production at the oilfield is expected to resume in the near term. Libya, where production dropped 120,000 bpd from December to 850,000 bpd in January, is exempt from the OPEC+ output cuts.
Brian L. Milne can be reached at email@example.com
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