The state of the global economy remains top priority for the oil sector as we enter the final quarter of the year.
Industrial performance figures from the US were at their lowest in three years and this depressed oil prices.
At the close of trading this week, Brent crude was priced around US$58 with WTI holding close to US$53 a barrel.
US job number gave some support
The good news from the US was a better employment picture, but the general malaise of the global economy still worries investors as it threatens oil demand.
American unemployment has dropped to a 50 year low of 3.5 percent.
The manufacturing sector is being hit hard with activity at a 10-year low.
A report from Commerzbank says “the crisis in the manufacturing sector now appears to be spilling over to the previously robust services sector.”
The oil price took a dive of more than 5 percent on both benchmarks last week, the biggest fall since July.
Inventories in the American market were up more than 3 million barrels, almost three times what was expected, according to the US Energy Information Administration.
Analysts feel the fundamentals of supply and demand are taking second place to the wider economic picture.
The economies in Germany and China are also softening according to recent economic data.
Adequately supplied by Saudi Arabia
The oil market remains adequately supplied and news from Saudi Arabia is that production is back to full capacity after the recent attacks on fields and refinery facilities.
The market was worried that it would take Saudi Arabi a lot longer to return supply, but the 5-percent of global oil production from the Kingdom is back and running. Repairs to damaged infrastructure are in progress.
The ongoing geopolitical standoff with Iran and the US continues with France now pressuring both parties to come back to the negotiating table with one month.
The prospect of Iran restarting nuclear activity is leading to increased tensions in an already delicate situation.
A report from Citigroup said that while we are looking at a year of weaker demand, the market also needs to pay attention to all risks and not just to severe macro risks.
The global head of commodity research, Ed Morse said there’s a danger of “shrugging off the most heightened geopolitical risk in years.”
Eyes on US-China trade talks
Trade talks between the US and China resume next week with high level meetings on the agenda.
No-one is expecting any great short-term resolutions and both sides will hold out for the best long term deal.
The US imposed tariffs on European goods this week, to include aircraft and dairy products.
With just three months left in the year, the general consensus is that prices will remain at these levels.
The third quarter was a tough one for the market and despite all efforts by OPEC and friends, little strength has returned to the price.
Investment remains a concern and finding balance in this fragile environment will continue to be a challenge.