Oil dips on manufacturing downturn, but OPEC cuts offer supporthttps://indianexpress.com/article/world/oil-dips-on-manufacturing-downturn-but-opec-cuts-offer-support-5522755/

Oil dips on manufacturing downturn, but OPEC cuts offer support

Despite the global market turmoil, traders said oil prices are expected to receive some support as supply cuts announced late last year by the Organization of the Petroleum Exporting Countries start to kick in.

Oil dips on manufacturing downturn, but OPEC cuts offer support
Leading economies in Asia and Europe have already reported a fall in manufacturing activity.

Oil prices dropped on Friday after the United States followed most other major economies into a manufacturing downturn, although supply cuts by producer club OPEC kept declines in check.
International Brent crude futures were down 21 cents, or 0.4 percent, at 0258 GMT at $55.74 a barrel.

U.S. West Texas Intermediate (WTI) crude oil futures were at $47.05 per barrel, down 4 cents, or 0.1 percent. Data for December from the Institute for Supply Management (ISM) on Thursday showed the broadest U.S. slowdown in growth for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty started to take a toll on the world’s biggest economy.

Leading economies in Asia and Europe have already reported a fall in manufacturing activity. “Led by a sharp fall in the U.S. ISM and China’s PMI falling below 50, the global manufacturing PMI fell to 51.5 in December (52.8 previously), a 27-month low,” Morgan Stanley said in a note following the release of the ISM data.

“The recent run of incoming data, coupled with global tightening financial conditions, has increased the downside risks to an already moderating global growth outlook,” the U.S. bank said.

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Singapore-based shipping brokerage Eastport said that a slowdown in factory utilisation would also weaken purchases of raw materials and fuel feedstocks including oil and petrochemicals.
Just as oil and stock markets struggle to find a footing, gold prices hit their highest in more than six months on Friday as investors put money into what’s perceived as a safe haven.

OPEC CUTS
Despite the global market turmoil, traders said oil prices are expected to receive some support as supply cuts announced late last year by the Organization of the Petroleum Exporting Countries (OPEC) start to kick in.

OPEC oil supply fell by 460,000 barrels per day (bpd) between November and December, to 32.68 million bpd, a Reuters survey found on Thursday, as top exporter Saudi Arabia made an early start to a supply-limiting accord, while Iran and Libya posted involuntary declines.

OPEC, Russia and other non-members – an alliance known as OPEC+ – agreed last December to reduce supply by 1.2 million bpd in 2019 versus October 2018 levels. OPEC’s share of that cut is 800,000 bpd.

“If OPEC is faithful to its agreed output cut together with non-OPEC partners, it would take 3-4 months to mop up the excess inventories,” energy consultancy FGE said.

Considering the planned cuts versus ongoing increases in US crude production, which hit a record 11.7 million bpd by late 2018, FGE said it expected Brent prices to range between $55-$60 per barrel in the first months of 2019.