Crude oil futures were lower in mid-morning trade in Asia Thursday as tech stocks tumbled after Apple revised its Q1 earnings guidance downwards. Meanwhile, concerns over the economic slowdown and lower demand further dampened market sentiment, industry sources said. At 10:30 am Singapore time (0230 GMT), ICE March Brent crude futures was down 28 cents/b (0.51%) from Wednesday’s settle at $54.63/b, while the NYMEX February light sweet crude contract was 68 cents/b (1.46%) lower at $45.86/b.
On Wednesday, Apple revised its Q1 guidance down, impacting equities market. In its latest statement released on Wednesday, the tech giant highlighted falling sales revenue in China and emerging market challenges. “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple said.
“This [the downward revision] comes a day after the sliding of China’s Caixin manufacturing PMI into contractionary territory, sporting declining new orders,” IG market strategist Pan Jingyi said. “The already shaky foundation for Apple owing to the likelihood of the company’s products being enlisted into the tariffs scuffle saw their latest move to lower revenue outlook packing a punch for share prices,” she added.
Market participants also attributed lower oil prices to fears of a slowing economy. “Oil markets rallied overnight on falling oil exports from Saudi Arabia, and markets reacted to it,” Phillip Futures’ senior commodities manager Avtar Sandu said. “However, there is a general concern on a slowing economy as seen in China’s PMI data, which is not so healthy, and hence demand is expected to remain weak. The RSI shows that oil is oversold, and people are more pessimistic now,” Sandu added.
According to a survey of analyst conducted by S&P Global Platts Wednesday, commercial crude stocks were expected to have declined 1.3 million barrels to around 440.11 million barrels during the week-ended December 28. The expected draw is insufficient to bring in a budding crude supply overhang, and would leave inventories to just shy of 8% above the five-year average of US Energy Information Administration-reported data, up from 6.9% during the week prior.
That said, the UAE’s energy minister Suhail al-Mazrouei said Tuesday that the OPEC/non OPEC cuts should bring balance back to the oil market in the first quarter of 2019. “As we start a new year, I remain optimistic toward achieving the market balance during the first quarter after [the] OPEC and Non-OPEC production cut. At this time last year we remember the same pessimistic views which we disagreed with and as we expected 2018 was a good year,” he said on Twitter.