SINGAPORE (Reuters) - Oil prices steadied on Monday after plunging nearly 8 percent in the previous session, but remain under pressure with Brent crude below $60 per barrel amid weak fundamentals and struggling financial markets.
Front-month Brent crude oil futures (LCOc1) were at $59.23 per barrel at 0202 GMT, up 43 cents, or 0.7 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures (CLc1), were up 11 cents, or 0.2 percent, at $50.53 per barrel.
The gains did little to make up for Friday's selloff, which traders have already dubbed 'Black Friday'.
Reacting to Friday's falls in Brent and WTI, China's Shanghai crude futures on Monday fell by 5 percent, hitting their daily downside-limit.
Greg McKenna, an Australian-based independent financial analyst, said there had been an "utter capitulation in crude oil" markets.
The downward pressure comes from surging supply and a slowdown in demand growth which is expected to result in an oil supply overhang in 2019.
(GRAPHIC: Global crude oil supply & demand balance - https://tmsnrt.rs/2PKtzIy)
WIDER DOWNTURN
Oil markets are also being affected by a downturn in wider financial markets.
"2018 clearly marked the end of the 10-year Asia credit bull market due to tightening financial conditions in Asia (especially China), and we expect this to remain the case in 2019," Morgan Stanley (NYSE:MS) said in a note released on Sunday.
"We don't think that we are at the bottom of the cycle yet," the U.S. bank said.
Oil markets have also been weighed down by a strong U.S.-dollar (DXY), which has surged against most other currencies this year, thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil, which are seen as more risky than the greenback.
"Anything denominated against the USD is under pressure right now, said McKenna.
Another risk to global trade and overall economic growth is the trade war between the world's two biggest economies, the United States and China.
"The U.S.-China trade conflict poses a downside risk as we forecast the U.S. to impose 25 percent tariffs on all China imports by Q1 2019," U.S. bank J.P. Morgan said in a note published on Friday.
However, the Wall Street Journal recently reported that Saudi Arabia and OPEC was looking to cut the current production by around 1 million barrels per day to 2016 levels and helped the WTI recover a small portion of its daily losses. According to a Saudi Official, this move would be announced as a plan to retain current output targets first set in 2016. As of writing, the WTI was trading at $51.30, losing 4.65% on the day and still down more than $5 for the week.
Meanwhile, the latest data from China showed that gasoline exports fell to the lowest level since October 2017 to revive concerns over the economic slowdown's negative impact on one of the world's biggest oil consumer's demand outlook. "The market is pricing in an economic slowdown - they are anticipating that the Chinese trade talks are not going to go well. The market doesn't believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand," Phil Flynn, an analyst at Price Futures Group in Chicago, told Reuters today.
Technical levels to consider
The initial support for the WTI aligns at $50.55 (daily low) ahead of $50 (psychological level) and $49.10 (Oct. 6, 2017, low). On the upside, resistances are located at $54 (daily high), $54.80 (Nov. 22 high) and $55.85 (Nov. 21 high).
(source:investing.com)
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