Crude Futures Lower on Demand Concerns

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange eroded further Monday, with the U.S. benchmark falling more than 1.5% amid resurging concerns over flat demand growth this year as markets await details of the US-China trade agreement to be signed Wednesday for fresh clues on global economic growth.

This week, traders will be watching out for projections on global supply-demand disposition from Organization of the Exporting Petroleum Countries and the International Energy Agency due for release Wednesday and Thursday, respectively. Market focus will likely remain on compliance with OPEC+'s most recent quotas, agreed upon in December.

The U.S. Energy Information Administration will release its monthly market outlook midday Tuesday while weekly inventory will be published as regularly scheduled at midweek.

At settlement, NYMEX February West Texas Intermediate futures dropped $0.96 to a six-week spot low $58.08 barrel (bbl) and ICE March Brent futures shed $0.78 to $64.20 bbl, the lowest settlement since Dec. 12.

NYMEX February RBOB futures eased 0.23 cents to end the session at $1.6573 gallon and NYMEX February ULSD futures plunged 3.04 cents to $1.8980 gallon, a fresh six-week low on spot continuous price chart.

Monday's lower settlements come despite some encouraging news on the U.S.-China trade front after the U.S. Treasury Department announced it no longer designates Beijing as a currency manipulator. The announcement came just two days before representatives from both countries are set to sign the first phase of the comprehensive trade agreement at the White House Ceremony. Furthermore, the Trump Administration announced it would resume semi-annual U.S.-China Comprehensive Economic Dialogue that was abandoned at the start of 2017 as a trade conflict between the two countries escalated. As the long-awaited signing of the trade deal approaches, some questions remain about the text of the agreement, including the timeline for tariffs removal and China's commitment to purchase U.S. agricultural and energy products. U.S. Treasury Secretary Steven Mnuchin reassured markets the details will be made public as soon as the two sides put their signatures on the deal this week.

While this week's signing of the trade deal should boost global equities, some in the market are skeptical the deal will provide a leg-up for oil prices. Traders continue to get a sense of relative oversupply in the market, with global demand unlikely to meaningfully pick up this year.

China's National Oil Company, CNPC, on Monday said Chinese crude oil demand will be just half of the estimates for 2019 and the slowest pace since financial crisis of 2008. According to CNPC's economists, negative impact of the trade war will continue to be felt in Chinese economy this year, depressing national growth below 6%. This sentiment was echoed in the estimates from World Bank that projected Asia's economic growth to decelerate at 5.7% in 2020, reflecting a further slowdown in China.

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

(CZ)

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