Oil prices fall as economic concerns outweigh supply risks

By Henning Gloystein
SINGAPORE, May 29 (Reuters) - Oil prices fell on Wednesday
on concerns the Sino-U.S. trade war could trigger a global
economic downturn, but relatively tight supply amid OPEC output
cuts and political tensions in the Middle East offered some
support.
Front-month Brent crude futures LCOc1 , the international
benchmark for oil prices, were at $69.85 at 0101 GMT, down 26
cents, or 0.4%, from the last session's close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were
at $58.70 per barrel, down 44 cents, or 0.7%, from their last
settlement.
"Crude oil was weak ... primarily as the bears on demand are
winning compared to the bulls on supply," James Mick, managing
director and energy portfolio manager with U.S. investment firm
Tortoise, said in an investor podcast.
"Investors are concerned from a macro perspective about
worldwide demand, particularly in the face of the growing trade
dispute between the U.S. and China," he said.
Fawad Razaqzada, analyst at futures brokerage Forex.com,
said another concern was that "falls in emerging market
currencies (are) making dollar-priced crude oil dearer to
purchase in those nations" and that crude prices could fall
back.
Despite the economic concerns, global oil demand is so far
holding up well, likely averaging over 100 million barrels per
day (bpd) this year for the first time, according to data from
the U.S. Energy Information Administration (EIA).
But analysts are concerned that tightening credit amid the
economic slowdown will hamper trading in commodities.
"We remain cautious regarding the short-term macroeconomic
environment," commodity brokerage Marex Spectron said in a note.
"Credit availability on the physical commodity markets is of
particular concern."
Despite the economic concerns dragging on oil markets, crude
prices remain relatively tight.
"Supply risks remain at elevated levels with continued
geopolitical uncertainty in the Middle East, as well as
Venezuela's well-known struggles," said Tortoise's Mick.
Adding to this are ongoing supply cuts led by the
Organization of the Petroleum Exporting Countries (OPEC) since
the start of the year to prop up the market.
OPEC and some allies including Russia are due to meet in
late June or early July to discuss output policy going forward.