Market Report & Analysis for 6/17/2019 Morning Edition
Morning Market Overview
Oil Futures Mixed, Demand Worry Counters Geopolitical Risk WASHINGTON, D.C. (DTN)
Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pulled back in overnight trade following Thursday’s rally that was spurred by an unexpected escalation in Middle East tensions, while concerns over slowing global demand continue to limit the upside.
Near 9 AM ET, NYMEX July West Texas Intermediate futures were flat at $52.25 bbl, with ICE August Brent up slightly at $61.50 bbl. NYMEX July RBOB futures gained 0.6cts to $1.7260 gallon, with the July ULSD contract 1cts higher near $1.8165 gallon. International Energy Agency cut on Friday its forecasts for global oil consumption this year for the second consecutive month, revised down 100,000 bpd in June, which follows a 90,000 bpd downward adjustment in May.
The Paris-based energy watchdog noted their downward revision for world oil demand follows a decline in projected global gross domestic product growth by the Organization for Economic Cooperation and Development in May when the 36 country bloc lowered its world GDP forecast to 3.2%. IEA added, “World trade growth has fallen back to its slowest pace since the financial crisis ten years ago, according to data from the Netherlands Bureau of Economic Policy Analysis and various purchasing managers’ indices.”
Organization of the Petroleum Exporting Countries also revised lower this week its forecast for global oil demand in the current year by 70,000 bpd for year-on-year growth of 1.14 million bpd. The revision was due to lower than expected demand in the first quarter by countries that are part of the OECD bloc, including the United States where gasoline demand slowed against expectations.
WTI and Brent futures surged more than 2% on Thursday following a torpedo attack against two oil tankers near the Strait of Hormuz, which serves as a waterway for nearly 40% of the world’s seaborne oil shipments. U.S. Secretary of State Mike Pompeo blamed Iran for the incident, as well as attacks a month earlier on pipelines in Saudi Arabia and on ships in waters near Fujairah. U.S. military released on Friday a video, showing what it claimed is Iran’s Revolutionary Guard removing an unexploded mine from one of the tankers targeted near the keyway, which further heightened concerns about oil security in the region and tensions between the United States and Iran.
While some analysts believe that the price-boosting effect of a violent incident would be short-lived, others claim multiple attacks on oil tankers in the key chokepoint for crude transportation opens a new chapter for the market’s security concerns.
