Oil prices drop while stock markets weaken
LONDON Oil prices fell yesterday, in line with weaker stock markets after evidence that economic growth in China, the world's second largest crude consumer, eased last year.
Brent crude oil futures were last down 35 US cents (48 Singapore cents) on the day at US$62.35 a barrel by 9.46am Greenwich Mean Time (5.46pm Singapore time), while US crude futures were down 23 cents at $53.57 a barrel.
The broader financial markets were weaker after data showed China's 2018 economic growth slowing to the weakest in 28 years, at 6.6 per cent versus 6.8 per cent in 2017.
Although the slowdown was in line with expectations and not as sharp as some analysts had expected, the cooling of the world's No. 2 economy casts a shadow over global growth.
"It remains quite likely that the trade spat with the US has played a part in this latest slowdown, but investors should also factor in that it simply isn't possible for the Chinese economy to grow at the pace that it has over the last 10 years, in the next 10 years, as the law of diminishing returns kicks in, and the economy becomes more mature," CMC Markets chief market analyst Michael Hewson said.
While there is concern a slowing global economy could impact oil demand growth and the price outlook, the production cuts implemented by the Organisation of the Petroleum Exporting Countries (Opec) would likely support crude oil prices, analysts believe.
"You can't justify oil prices at these levels. We're looking basically at an average of almost US$70 a barrel for Brent in 2019," ING commodities strategist Warren Patterson said.
"I am getting increasingly concerned about how tight the market will be going into 2020."
- REUTERS
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