Saudi Arabia: Trade tensions and weak global economic data continue to weigh on oil prices in August
August 27, 2019
Oil prices continued to tumble in recent weeks and almost erased the gains made in January–May. In fact, on 7 August, the OPEC oil basket hit its lowest price since early January, although has climbed slightly since then. On 26 August, the OPEC oil basket traded at USD 59.2 per barrel, a 6.6% decrease from the same day in July. While the price was up 15.8% from the start of the year, it was still 13.0% lower than on the same day in 2018.
Oil prices extended losses in August, reflecting a flurry of weak economic data in some key economies such as China and the European Union. Moreover, rising trade tensions between China and the United States are adding further downside pressure on oil prices. This downward pressure is likely to have increased further after China—which buys around 6% of all U.S. oil exports—unveiled a 5% levy on U.S. oil imports as part of broader retaliatory tariffs announced on 23 August.
Conversely, OPEC+ continues to cut production as part of deal to support prices, which was extended to 31 March at the 1–2 July meeting, while heightened geopolitical tensions in the Middle East threaten to disrupt oil supply. Particularly as a result of much lower output from Saudi Arabia and significant declines in production in Iran, Libya and Venezuela, combined crude oil output among OPEC members declined by 246,000 barrels per day month-on-month in July to 29.61 million barrels per day (mbpd).