Oil remains weighed down by trade war despite pricing above $60

Morgan Stanley revises demand growth for 2019 at 800,000 bpd, down from earlier estimates of 1 million bpd

The IIF is less bullish about oil prices in 2020 and forecasts Brent to average $60 per barrel. Reuters

Trade woes returned to weigh on oil in spite of a price surge above $60 per barrel after a higher draw down of US crude lifted sentiment.

Brent was trading at $60.46 per barrel at 2.48pm UAE time after breaching the $60 mark on Wednesday when prices gained a dollar after data showed US inventory declined by 11.1 million barrels per day (bpd).

Lower imports were behind the inventory drop, which was higher than the 2 million barrel draw indicated earlier by the American Petroleum Institute.

West Texas Intermediate was in positive territory, trading at $56.22 per barrel at 2.48pm UAE time, gaining nearly 4.5 per cent over its opening this week, when tit-for-tat tariffs by China and the US dampened sentiment.

However, markets were mollified towards the close of the Group of Seven (G7) meeting in Biarritz, France earlier this week after a softening of tone from US President Donald Trump towards Beijing and Tehran.

China’s top trade negotiator had urged calm, which Mr Trump said was a positive move. He also said he was willing to meet Iranian President Hassan Rouhani, following efforts by G7 host French President Emmanuel Macron to defuse tensions between Tehran and Washington.

Meanwhile, investment bank Morgan Stanley slashed its forecast for crude prices for the remainder of the year, citing weak economic growth, slowing demand as well as higher supply from the US that could derail efforts by the Opec+ alliance to draw inventory levels down.

The bank cut its forecast for Brent to $60 from $65 per barrel, with WTI revised down by $3 to $55.

“The slowdown in oil demand growth that started in early 2019 has not come to an end yet. Demand growth has softened as global economic growth has slowed,” the bank said in a note.

Morgan Stanley said a deeper cut from Opec+ would be needed next year to keep markets balanced. Demand growth is forecast at 800,000 bpd, down from 1 million bpd this year, while the bank expects demand growth to average 1 million bpd in 2020, a revision of 400,000 bpd from its earlier estimates.