Oil holds losses as OPEC uncertainty adds to weak US outlook

The unresolved US-China trade tensions coupled with the US weak economic outlook has put downward pressure on the oil price. (Reuters pic)

SEOUL: Oil held losses as OPEC and its allies continue to struggle to set a date to discuss an extension to supply cuts and as US economic indicators signal weakening demand.
Futures were little changed in New York after retreating 1.1% on Monday. After talks with his Russian counterpart, Iran’s Oil Minister Bijan Namdar Zanganeh said he was willing to holds talks in July, one week later than the timing proposed by other group members. A Federal Reserve gauge for factories signalled a record slowdown in June, while sentiment among US homebuilders unexpectedly dropped for the first time all year.

Oil has lost about 22% since late April as growing American inventories and an entrenched trade dispute between the US and China continue to cloud the demand outlook. While last week’s attacks on two tankers near the Strait of Hormuz raised concerns about disruption to crude flows, the focus has returned to the struggle by the Organization of Petroleum Exporting Countries to fix a meeting on supply cuts that are due to expire at the end of the month.

“Crude remains vulnerable on falling demand expectations from trade uncertainty and OPEC’s inability to solidify its curtailment of future production,” Ed Moya, chief market strategist at Oanda Corp., said in a note. “US factory and housing data showed the world’s largest economy is slowing down faster than expected.”

West Texas Intermediate for July delivery slid 5 cents to US$51.88 a barrel on the New York Mercantile Exchange as of 11:52 a.m. Singapore time. Futures ended Monday 1.1% lower at US$51.93 after capping a 2.7% weekly loss on Friday.

Brent for August settlement lost 4 cents to US$60.90 a barrel on London’s ICE Futures Europe Exchange. Futures slid US$1.07 to close at US$60.94 on Monday. The global benchmark crude traded at a US$8.79 premium to WTI for the same month.

Comments from the Iranian oil minister about his willingness to hold talks next month leave unresolved a one-month impasse that has exposed the political fissures at the heart of OPEC. The group needs to agree on whether to keep restraining oil production for the rest of the year as crude demand shows signs of weakening. Zanganeh indicated he could meet July 10-12. The meeting originally was scheduled for June 25-26, and Russia has been seeking to move it to July 3-4.

The dispute over the timing of the meeting is playing out amid a broader geopolitical confrontation as Saudi Arabia accuses Iran of complicity in attacks on the two oil tankers. Iran has denied culpability.