Analysts seem determined to ignore good news in favour of predicting doom: File Image/PixaBay
Continued and more substantial losses for crude were incurred on Friday due to growing doubt that the U.S. and China won't sign their long-awaited trade agreement after all - however, the commodity was still on track to post its biggest monthly gain since April, with an increase of about 6 percent.
Lingering worry that U.S. president Donald Trump officially backing Hong Kong protests to protect democracy could prompt China to back out of trade negotiations resulted in Brent on Friday settling down $1.44 at $62.43 per barrel; this was down 1.5 percent on the week but still contributed to a monthly 6 percent gain.
West Texas Intermediate settled down $2.94 at $55.17, a 4.1 percent fall on the week after three consecutive increases, but still good enough for a monthly jump of about 2.3 percent (its highest increase since June).
Frank Schallenberger, analyst, LBBW
There is simply too much oil in the market
Another development that presumably negatively affected traders was the Tass news agency on Friday reporting that Russia's oil minister believed it will be better to postpone any new supply caps until April; John Kilduff, founding partner at Again Capital, remarked, "The OPEC accord with Russia could be fraying a bit; it undercuts and undermines everyone's perception of the commitment."
Additionally, the announcement on Friday by Adel Abdul-Mahdi, prime minister of Iraq, that he will resign following weeks of protests in that country contributed to the emerging bearish sentiment - the theory being that an end to Iraq's civil unrest will lead to an end of threats to oil disruption, which in turn would cause oil prices to further decline.
While a variety of news published over the past few weeks suggest that global demand for oil remains robust despite geopolitical concerns and that the market next year may well be tight due to output shortages from countries such as Iran and Venezuela, the analytical community seems poised to resume its gloomy outlook - if the latest Reuters poll regarding the commodity is any indication.
The news agency on Friday reported that a poll of 42 economists and analysts forecast Brent to average $62.50 per barrel next year, little changed from last month's $62.38 outlook, which was the lowest prediction for 2020 in about two years; they also predicted demand growth at 0.8-1.4 million barrels per day next year.
Frank Schallenberger, analyst at LBBW, declared, "There is simply too much oil in the market."
And even though the case could be made that short-term economic forecasts have consistently be proven wrong, Harry Tchilinguirian, global oil strategist at BNP Paribas, worried that the first half of 2020 could see global inventory build as weaker economic growth chips away demand.