Global economic situation prevents oil price from strengthening

Posted 08 February, 2019

The price for oil showed another attempt to rise on Thursday but summoned new profit taking in the market. As a result, the quotes fell down to the $60/bbl handle. However, the prices for Brent oil have managed to restore positions by Friday, hitting the $61/bbl handle. Despite the increase, daily decline remained heavy.

Oil quotes that have already shown instability face pressure from the macroeconomic signals. Specifically, the central banks worldwide keep lowering their economic growth outlook for 2019, which gives the energy markets reasons to believe that demand is slackening. The European Commission downgraded its euro-area outlook yesterday. Moreover, the EC cut the forecast for average oil price dramatically – 20% down to the $61/bbl line.

Trade situation hardly brings optimism. It was reported in the media that the meeting of Donald Trump and Xi Jinping is unlikely to take place before March 1. For reference, the previous agreement between the countries regarding the suspension of the import duty launch will expire in March. As a result, all markets will be highly careful while expecting US-China trade talks.

With such course of events, the oil market failed to get support from Saudi Arabia which expressed intentions to raise oil prices to the Mediterranean region beginning from March. The market environment generally remained the same with prevailing uncertainties and fears. As a result, traders stay on pins and needles taking measures to prevent the price rise. In the near term, it is still possible that oil prices may fall down below $61/bbl again.

Previous forecast

11 February, 2019 17:35

← US-China trade talks again take centre stage in oil market

Following the Friday trading session, the Brent oil prices managed to slightly regain positions. However, the overall figures showed that the last week brought some 1% decline. The quotes saw some support at the $61/bbl handle and improved to $62/bbl. Despite the increase, the oil market has remained shaky and started this week with a price decline. The current price stays near $61.80/bbl. In the short run, the Brent prices will remain based on the stock markets and macroeconomics. The main event for this week – US-China trade talks. The price still can fall below the $60 handle.

US-China trade talks again take centre stage in oil market

Next forecast

07 February, 2019 18:02

BOE decides to leave interest rate unchanged as market expected →

After the regular meeting held on Thursday, the Bank of England, in particular, its Monetary Policy Committee, has reportedly decided to leave the interest rate at 0.75%, which in fact agrees with the market players' forecast. The BOE's decision has fueled the decline of the sterling against the US dollar. For now, the UK can record the slowest economic growth over the past 10 years in 2019.

BOE decides to leave interest rate unchanged as market expected
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