Oil steadied yesterday, trading below $69 a barrel, as concern over the US-China trade dispute and global economic outlook offset support from Middle East tensions and supply cuts. Figures yesterday showed that profits for Chinese industrial companies shrank in April while new orders for US-made capital goods fell more than expected in a further sign that the economy is slowing.
The main factor preventing crude prices from rising on the geopolitical news is the concern about the global economy, said Petromatrix oil analyst Olivier Jakob.
“The macroeconomic outlook does not look good,” Jakob said.
Brent crude, the global benchmark, was up 5 cents at $68,74 a barrel by 0839 GMT, having fallen by about 4,5 percent last week. US West Texas Intermediate crude was down 36 cents at $58,27. Both crude contracts registered their biggest weekly price declines of the year last week. Public holidays in the United States and Britain yesterday limited participation, keeping volumes low.
Rising tension between the United States and Iran, with Washington’s announcement on Friday that it would deploy more troops to the Middle East, has had little impact on the market so far.
“This move further increases tensions in the regions, but with the US and UK markets closed today and most of the geopolitical tension likely already priced in to the market, effects on crude prices may remain subdued,” JBC Energy said in a report.
Money managers cut their net long US crude futures and options positions — bets on rising prices — in the week to May 21, the US Commodity Futures Trading Commission (CFTC) said on Friday.
Oil supply cuts — both voluntary and those resulting from US sanctions — have boosted prices this year and are still keeping a floor under prices.
The Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, an alliance known as OPEC+, has been cutting supply to tighten the market.
US sanctions on OPEC members Iran and Venezuela have curbed their crude exports, reducing supplies further.
Brent’s price structure remains in backwardation, with prices for prompt delivery higher than those for future dispatch, suggesting a tight balance between supply and demand.