Oil falls to Sh5,300 on economic worries, surging supply

Oil fell to around $53 (Sh5,300) a barrel on Wednesday, pressured by rising output in major Organisation of Petroleum Exporting Countries (Opec) and non-Opec producers and concern about an economic slowdown that could weaken demand.

Russian production hit a post-Soviet record in 2018, figures on Wednesday showed. Earlier this week, official data showed US output reached a record in October and Iraq boosted oil exports in December. Brent crude fell 70 cents to Sh5,310 ($53.10) a barrel yesterday. On December 26, it reached Sh4,993 ($49.93), the lowest since July 2017.

US crude slipped 62 cents to Sh4,479 ($44.79). “The omens are far from encouraging,” said Stephen Brennock, of oil broker PVM, about the price outlook for 2019, citing rising non-Opec supply and the likelihood of further increases in oil inventories. “The current bearish bias will, therefore, continue in the near term and it stands to reason that oil will struggle to break out from its current trough.”

Excess supply

Oil fell in 2018 for the first year since 2015 after buyers fled the market in the fourth quarter over growing worries about excess supply and economic slowdown. US crude slumped nearly 25 per cent and Brent by 20 per cent.

Surging shale output has helped make the US the world’s biggest oil producer, ahead of Saudi Arabia and Russia. Oil production has been at or near record highs in all three countries.

Adding to concern about the economic slowdown, a series of purchasing managers’ indexes for December showed declines or slowdowns in manufacturing activity across Asia - the main growth regions for oil demand.

China issued its first batch of crude import quotas for 2019 on Wednesday at a lower volume than for the same batch a year ago though volumes are likely to climb later this year.