Crude oil futures sank in midmorning trading Tuesday after a reduced outlook for global oil demand growth exacerbated concerns about oversupply.
ICE January Brent was down $2.73 at $67.39/b and NYMEX December WTI was down $2.42 at $57.51/b.
Oil markets moved lower in the wake of OPEC's downward revision of the outlook for oil demand growth in its Monthly Oil Market Report. Global oil demand was now expected to grow by 1.5 million b/d to 98.79 million b/d in 2018, and by 1.29 million b/d to 100.08 million b/d in 2019, down 40,000 b/d and 70,000 b/d, respectively.
At the same time, the report revised upward the estimate for non-OPEC supply growth by 90,000 b/d to 2.31 million b/d in 2018 and by 120,000 b/d to 2.23 million b/d. The reports now expects non-OPEC supply to reach 59.86 million b/d in 2018 and 62.09 million b/d in 2019.
"The OPEC report is baking in a lot of expectations of slowing global activity," Tradition Energy analyst Gene McGillian said.
On Monday, Saudi Energy Minister Khalid al-Falih said that OPEC and its partners would need to cut at least 1 million b/d from October's output levels to avoid oversupply, according to the group's analysis, but expectations of OPEC supply cuts came into doubt after US President Donald Trump called for the bloc and its allies to maintain production levels.
"Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!" Trump said in a tweet Monday.
"The market seems to be interpreting the president's warning to OPEC that they are not going to cut production," McGillian said, "but, at some point, their financial livelihood depends more on what they do. We have got to be entering an area where they are going to initiate some kind of action."
On Tuesday, UAE energy minister Suhail al-Mazrouei said OPEC would not respond to US pressure to lower oil prices, but would seek a balanced market.
"We are not going to respond to political needs," Mazrouei, who holds the rotating OPEC presidency this year, told S&P Global Platts. "We will do what is right for maintaining balance in supply and demand. Anything else is not our job. Our job is not to keep prices low or raise the prices, our job is to maintain balance in the market, but not be oversupplied or undersupplied."
Product futures tracked the oil complex lower, with NYMEX December ULSD down 5.19 cents at $2.1037/gal and NYMEX December RBOB down 5.83 cents at $1.5784/gal.
