Poor U.S. Manufacturing Data Causes More Losses for Crude

Analysts also say American output growth is waning - which they say is good news: File Image/PixaBay

Another day, another round of doldrums for crude trading, with the overly familiar fears of an economic downturn - this time spurred by troubling U.S. data - causing Brent on Tuesday to settle down 36 cents at $58.89 per barrel, and West Texas Intermediate to settle down 45 cents at $53.62 per barrel.

The modest losses were triggered by a survey from the Institute for Supply Management showing that U.S. manufacturing activity dropped to a more than decade-low in September as the U.S.-China trade war impacted exports; the ISM manufacturing activity index showed a reading of 47.8, below economists' expectations of 50.1.

A reading below 50 indicates contraction.

Jim Ritterbusch, president  of Ritterbusch and Associates, noted, "As overseas economic weakening slowly morphs into the U.S., additional downward revisions in forecast global oil demand for this year and next will likely be forthcoming."

Comparatively good news was ignored by traders, namely, a report that Organization of the Petroleum Exporting Countries (OPEC) output fell to 28.9 million barrels per day (bpd) in September, down 750,000 bpd from August's revised figure and the lowest monthly total since 2011.

Also, the Energy Information Administration reported that U.S. crude oil output fell 276,000 bpd in July to 11.81 million bpd.

The latter disclosure came on the heels of John Kemp, commodities analyst for Reuters, declaring that American production growth "is decelerating gradually in response to lower prices, which should reduce predicted over-supply in 2020 and force the global oil market back toward balance."

Kemp added that the situation will remain unchanged "unless and until there are stronger indications of economic growth next year."

On the other side of the world, however, the fear is of skyrocketing prices, at least as far as Mohammed bin Salman, crown prince of Saudi Arabia, is concerned: he told media that "If the world does not take a strong and firm action to deter Iran, we will see further escalations that will threaten world interests.

"Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven't seen in our lifetimes."

Salmon's remarks came two weeks after a drone and missile attack on Saudi Arabia's oil facilities that Riyadh and Washington blame on the Islamic republic.