Traders Dissatisfied With Business Growth Figures Cause More Crude Losses

by Ship & Bunker News Team
Thursday October 3, 2019

An Institute for Supply Management report showing that the U.S. services sector expanded in September - but at a much slower pace than expected - was enough to cause crude prices to decline yet again on Thursday.

Brent fell 1 cent to $57.68 per barrel, while West Texas Intermediate settled down 19 cents to $52.45 per barrel.

For the record, the Supply Management report issued an index expansion of 52.6 compared to an expected reading of 55.3 from economists surveyed by Dow Jones, its weakest reading since August 2016 (any read under 50 signals contraction).

Additionally, a survey released Thursday showed that Euro zone business growth stalled in September; also adding to traders' angst was U.S. crude inventories rising 3.1 million barrels last week, more than predicted.

However, crude's fall was cushioned somewhat by figures showing that U.S. crude output fell in July and by hope that Washington and Beijing may progress in resolving their trade dispute.

While the news of declining U.S. crude output soothed traders' fears to a degree, it worried analysts such as John Kemp, commodities analyst for Reuters: he wrote that  "Given the continued slide in oil and gas prices as well as the number of active rigs drilling, [mining and oil and gas] investment is set to fall even further in the third and fourth quarters of this year.

"During the last downturn, investment slumped from a peak of $173 billion in the fourth quarter of 2014 to just $63 billion in the second quarter of 2016."

However, Kemp conceded that the current "downturn" (terminology that many economists think is inappropriate given current economic circumstance "is much milder, so far, so the hit to the economy is unlikely to be as severe."

Meanwhile, another factor that has spooked crude traders of late - namely, Saudi Arabia's quick recovery after attacks on its facilities last month - may impact upcoming sessions due to the kingdom's announcement on Thursday that oil output has been fully restored.

Prince Abdulaziz bin Salman, energy minister for the Saudis, said his nation's current oil production capacity stands at 11.3 million barrels per day.