Oil prices slip on weak markets and economy fears

However, prices were prevented from falling much further by supply cuts led by the Opec

Oil facilities in Venezuela. Reuters

Oil markets fell on Friday, pulled down by worries over a global economic slowdown, although Opec-led supply cuts and US sanctions against Venezuela provided crude with some support.

US West Texas Intermediate (WTI) crude futures stood at $52.17 per barrel, down 0.9 per cent, from their last settlement. WTI is a grade of crude oil used as a benchmark in oil pricing. Whereas, the International Brent crude oil futures were down by 0.8 per cent, at $61.15 per barrel.

Weighing on financial markets were concerns that trade disputes between the US and China would remain unresolved, denting global economic growth prospects.

US President Donald Trump said on Thursday that he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to strike a trade deal.

If there is no agreement between the world's two biggest economies, Mr Trump has threatened to increase US tariffs on Chinese imports. Another round of talks is scheduled for next week in Beijing.

A major risk to supply comes from Venezuela after the implementation of US sanctions against the Opec member's petroleum industry in late January. Analysts expect this move to knock out 300,000-500,000 barrels per day of exports.

"The [Venezuela] disruption overall seems manageable both for the US and the global market," said Norbert Rucker, head of commodity research at Swiss bank Julius Baer. "The oil market sits on a comfortable cushion of supply."

On Thursday, the European Commission sharply cut its forecasts for euro zone economic growth due to global trade tensions and an array of domestic challenges.

The Commission said euro zone growth this year would slow to 1.3 per cent from 1.9 per cent in 2018, before rebounding in 2020 to 1.6 per cent.

Despite this, traders said crude prices were prevented from falling much further by supply cuts led by the Opec, adopted late last year with the aim of tightening the market and propping up prices.

As part of the cuts, Saudi Arabia cut its output in January by about 400,000 bpd to 10.24 million bpd, according to Opec sources. That puts Saudi crude oil production almost 1.7 million bpd below that of the US, which has been churning out around 11.9 million bpd in late 2018 and early 2019 - up by more than 2 million bpd from a year earlier.

"The Opec+ meeting in April looms large, and we expect that if the group remains committed to their production targets… oil prices have further upside," said US investment bank Jefferies on Friday in a note.