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Thursday, 22 October 2020

Oil prices dip on gloomy economic outlook

Reuters , Monday 19 Jan 2015
Views: 1426
Views: 1426

Brent crude oil prices dipped back below $50 a barrel on Monday as Europe's and Asia's economic outlook darkened, although some price support came from falling U.S. output.

Analysts said prices were supported around current levels but warned that there was not much room for gains.

"Some positive data points helped to stabilize oil for now ... Upbeat IEA comments and a falling U.S. rig count were the latest positive news. While the news was able to halt oil's price decline, it was not enough to turn prices bullish," Morgan Stanley said on Monday.

China is due on Tuesday to report economic growth data that is expected to be the weakest in 24 years.

In Europe, Thursday's meeting of the European Central Bank will likely see the launch of a government bond-buying campaign, pointing to further euro falls against the dollar as well as to downward pressure on oil prices.

"It is not hard to find evidence of increasing concerns around global economic weakness. Yield curves across the world have been flattening (longer term yields falling relative to short ones), a dynamic typically associated with expectations of weakening economic conditions," Timera Energy said on Monday.

Brent crude futures were trading at $49.46 per barrel at 0828 GMT, down 71 cents since their last settlement. U.S. crude was trading down 81 cents at $47.88 a barrel.

Oil prices have dropped by more than half since last June as output around the world soared while demand growth slowed. Although the International Energy Agency (IEA) said last week a reversal in the trend was possible this year, it added that prices may fall further before rising again.

While the price drop has been a boon for large energy consumers, it is hitting exporters hard. Malaysia will announce measures on Tuesday to help it adjust to the impact of reduced oil and gas earnings.

Analysts said that prices would likely rise away from $50 per barrel, but many noted that the longer-term outlook was for oil to remain at lower levels than in recent years.

"We do not subscribe to the theory of US$20/bbl (barrel) oil. The price may go down to the US$30/bbl level for a short while, but it will bounce back," Facts Global Energy (FGE) said.

"We believe it will be in the US$60-80/bbl price range till the end of the decade," FGE said.

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