From a two-day decrease, oil prices have risen up alongside assets as predictions of most central banks stimulate recession-related concerns.
But, oil increases were capped when the OPEC or Organization of the Petroleum Exporting Countries showed a decrease in the forecast of a downbeat outlook for the remaining months of 2019. The group also highlighted the economic growth slowing down, challenges by rivals in 2020, which furthers the importance of building a case to keep up an agreement to hold and restrain fuel supply.
According to the director of futures of Mizuho New York, Bob Yawger, “OPEC killed the golden goose. We’ve had some little rallies back into the green, as the business tries to follow equities higher, but the essentials in the release are so bearish that it caps the rallies.”
US crude CLc1 increased 40 cents equivalent to $58.47 per barrel, having decreased 1.4% in Thursday and another 3.3% on the previous day. On the other hand, Brent crude LCOc1 closed their session with an additional 41 cents or 0.7% which totals to $58.64 per barrel, after a drop of 3% on Wednesday and a 2.1% on Thursday.
Before the release of the OPEC monthly report, Brent reached its highest at $59.50 while the US crude settled at $55.67, as interest rate cuts from the federal reserve as expected by most investors. The European Central Bank focuses it moves next month to contest weakening growth.
The benchmarks of both Brent and US crude celebrated with small gains after suffering from two consecutive weeks of losses, combined with Wall Street’s third weekly loss, worrying investors about signs of recession, and trade tensions between China and the US.
In the BNP Paribas forecast, the numbers got cut for Brent with $9 to $62 each barrel, while US crude with $8 to $55 every single barrel. The report cites the slowing economy as its primary reason, with the US-China trade dispute backing up the prime cause.
Data released earlier this week also incorporated a shocking drop in China’s overall industrial output to the lowest in 17 years. There is also a report on Germany’s exports falling, which hit its economy for the second quarter.
Brent’s price is still up by about 10 percent this 2019 as it was supported by OPEC supply cuts and its allies like OPEC+ Russia.
As was reported in July, OPEC+ has decided to continue oil output cuts until March 2020 to boost the prices.
Phin Ziebell, a senior economist from the National Australia Bank, poses this question, “At what point will further output cuts be needed at the back end of this year from OPEC and Russia to keep things going the way they are?”
According to an official indicated in Saudi Arabia this August, more steps may be coming as the country is committed to doing extreme measures as long as the market will stay balanced.
Also capping the gains recorded on Friday, many US energy companies have increased the number of oil rigs in operation, which is the first time it happened after seven weeks.