Abu Dhabi: Downgrades on global economic growth coupled with the ongoing US-China trade dispute will keep oil prices in the $55-$60 range, analysts said.

In its World Economic Outlook released last week, the International Monetary Fund (IMF) projected global economic growth at 3 per cent for 2019, the lowest growth since the financial crisis in 2008. That news was followed by China reporting a 6 per cent growth in its economy during its third quarter, representing its slowest rate of growth since 1992 and missing its own projections of a growth rate of 6.1 per cent.

On Friday’s closing, Brent was trade at $59.42, with West Texas Intermediate (WTI) closing on $53.78, both of which were down for the week.

“A combination of a weak demand at home and lower exports due to the ongoing trade war with the US has taken its toll on Chinese growth, although recent economic data point to signs of green shoots beginning to emerge,” said Ole S. Hanson, head of Commodity strategy, Saxo Bank. “Crude oil traded lower but overall it looks as if both WTI and Brent crude oil continue to settle into relative tight ranges around $55 and $60 respectively,” he added.

“The global outlook for demand remains challenging with the current weak sentiment not being helped by a recent IMF global growth downgrade and uncertainty surrounding trade negotiations between the US and China,” he said, highlighting how market uncertainty would continue to affect global demand for oil.

Production cuts

Hanson said that a new round of oil production cuts by Opec+ could be an option to help support prices.

“Opec and Russia may, given the current demand outlook, be forced to maintain and potentially cut production even further in 2020. Whether that can be achieved or not is likely to refrain the market, barring any renewed geopolitical event, from rallying anytime soon.

“President Putin’s visit to the Middle East region this past week further cemented the increased cooperation between Russia, Saudi Arabia and its allies in the GCC. A development which began in earnest back in early 2017 with the agreement to curb oil production in order to stabilise the price,” he added.

Hanson said that one positive for Opec+ states was a slowdown in US shale production in 2019, which has seen weekly rig counts going down.

“Perhaps reducing the need for Opec+ action is the fact that US shale production growth has slowed in 2019 and look set to slow even more over the coming years. Lower crude oil prices and increased scrutiny from investors looking for a return instead of rapid growth have led to an almost continued reduction in the weekly rig count since last November,” he added.