Global oil prices extended declines Tuesday, taking U.S. crude prices close to the $52 mark, as investors cast further doubt on the fate of last week's China trade deal and re-priced markets for slowing near-term growth.
The International Monetary Fund is likely to cut its global economic growth forecasts later today, from a prior forecast of 3.6% growth in 2020, ahead of its autumn meetings in Washington, as trade slows and investment wanes amid the ongoing U.S.-China tariff dispute. In fact, data from China this morning showed the weakest factory gate prices in at least three years, which, along with slumping exports and uneven government investment, will likely see a third quarter GDP print of around 6.1% later this week from the world's second-largest economy
"While the market was initially positive about the "mini trade deal" between the US and China, it has lost this enthusiasm with still limited information available, along with the fact that this is not a comprehensive and final trade deal," said ING's head of commodity strategy Warren Patterson.
Brent crude contracts for December delivery were seen $1.02 lower from Monday's New York close to trade at $58.83 per barrel, putting the global benchmark for crude some 18.2% lower -- and within touching distance of bear market territory -- since hitting a multi-month peak of $71.95 in the wake of drone attacks on two key Saudi oil facilities.
WTI contracts for November delivery, which are more tightly linked with U.S. gasoline prices, were marked $ lower at $52.55 per barrel, and have fallen 16.45% since the September 14 attacks on the Abqaiq and Khurais facilities in eastern Saudi Arabia.
However, gains from both the Saudi attacks, as well as Trump's renewed stance on Iran sanctions, have been tempered by the rise in U.S. shale production, which the Energy Department expects to reach 8.8 million barrels per day next month.
Around half of that total -- a record high 4.485 million barrels -- is expected to come from the shale-rich Permian Basin that laps between Texas and New Mexico, with increases also forecast for the Bakken region shared by North Dakota and Montana and the Eagle Ford field in north Texas.
The slumping crude market is expected to take its toll on energy sector profits during this third quarter earnings season, as well, and with with crude some 27% lower than it was last year, and WTI prices down 8.5% for the third quarter itself, energy sector stocks are likely to see a collective 34.3% decline in profits to around $14.6 billion.
Last month, Exxon Mobil Corporation (XOM - Get Report) warned that overall profits in the three months ending in September would fall by around 50% from the same period last year to around $3.1 billion. Exxon's oil and gas production division would see a 45% slump from last year's $4.23 billion total, the company said, while downstream profits will likely tumble 70% to $500 million. Exxon will publish its formal third quarter earnings on October 31.