Oil edges down as slowing China economy undermines
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[January 21, 2019]
By Amanda Cooper
LONDON (Reuters) - Oil prices edged lower
on Monday, echoing a weaker tone on global stock markets after evidence
that economic growth in China, the world's second-largest crude
consumer, eased in 2018.
Brent crude oil futures <LCOc1> were down 13 cents at $62.57 a barrel by
1207 GMT, while U.S. crude futures <CLc1> lost 10 cents at $53.70 a
China's 2018 economic growth slowed to the weakest in 28 years, data
showed, at 6.6 percent versus 6.8 percent in 2017.
Although the slowdown was in line with expectations and not as sharp as
some analysts had expected, the cooling of the world's No.2 economy
casts a shadow over global growth.
"It remains quite likely that the trade spat with the U.S. has played a
part in this latest slowdown," CMC Markets chief market analyst Michael
"But investors should also factor in that it simply isnít possible for
the Chinese economy to grow at the pace that it has over the last 10
years, in the next 10 years."
While there is concern that a slowing global economy could impact oil
demand, production cuts implemented by the Organization of the Petroleum
Exporting Countries are likely to support crude oil prices, analysts
"You can't justify oil prices at these levels. We're looking basically
at an average of almost $70 a barrel for Brent in 2019," ING commodities
strategist Warren Patterson said.
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A pumpjack is seen at the Sinopec-operated Shengli oil field in
Dongying, Shandong province, China January 12, 2017. Picture taken
January 12, 2017. REUTERS/Chen Aizhu
"I am getting increasingly concerned about how tight the market will be going
A separate report from China's National Bureau of Statistics on Monday showed
crude oil refinery throughput in 2018 climbed to a record 12.1 million barrels
per day (bpd), up 6.8 percent from the previous year.
In the United States, energy companies cut the number of rigs drilling for oil
by 21 in the week to Jan. 18, taking the count down to 852, the lowest since May
2018, energy services firm Baker Hughes said on Friday.
It was the biggest decline since February 2016, as drillers reacted to the 40
percent plunge in U.S. crude prices late last year. However, U.S. crude oil
production <C-OUT-T-EIA> rose by more than 2 million bpd in 2018, to a record
11.9 million bpd.
With the rig count stalling, last year's growth rate is unlikely to be repeated
in 2019, although most analysts expect annual production to average well over 12
(Additional reporting by Henning Gloystein in SINGAPORE; Editing by Dale Hudson
and Louise Heavens)
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