Investing.com - The fear of a global recession and other unknowns are ruling oil more than the expressed desire of the Saudis to balance the market with production cuts.
U.S. West Texas Intermediate and U.K. Brent crude both fell back after briefly rising in Monday's session as health care shares on Wall Street tumbled on a federal ruling that Obamacare was unconstitutional and Nasdaq erased its slim gains for the year, placing U.S. stocks on track to their worst December in more than 80 years, according to Reuters.
Outside of the U.S., China reported weaker-than-expected retail sales data, which grew at its weakest pace since November 2003.
The Bank of International Settlements (BIS), an umbrella group for the world’s central banks, warned at the weekend of more market selloffs in the near future. Britain, meanwhile, has a little more than 100 days to put its divorce from the EU into action, with Prime Minister Theresa May's term of office looking increasingly vulnerable.
"Oil is still trying to find a bottom as macroeconomic fears are outweighing common sense," said Phil Flynn, senior market analyst for energy at The Price Futures Group brokerage in Chicago.
"With trade war fears and a weak stock market it is hard for oil traders to look at the tightening oil market situation with any sense of dread. Instead, It is trading on what may happen If the economy slows down. We will look to the outside markets for direction as the short-term bullish fundamentals for oil don’t seem to matter."
WTI crude was down 84 cents, or 1.6%, at $50.63 per barrel by 12:01 PM ET (17:01 GMT).
Brent fell by 66 cents, or 0.4%, to $59.88.
Trading volumes in WTI were also lighter than usual, reflecting reduced activity typical of a holiday season.
With just about two weeks to the end of 2018, WTI remains down about 16% on the year and some 33% lower from four-year highs of nearly $77 per barrel hit in early October. Brent is down about 10% on the year and nearly 32% lower from four-year highs of nearly $87 per barrel hit two months ago.
Crude prices briefly bucked their lower trend last week, rising as much as 3% in Thursday’s session on a Bloomberg report that Saudi Arabia plans to slash exports to the United States in the coming weeks in an effort to dampen visible build-ups in crude inventories. Saudi crude shipments to the U.S. next month could even test the 30-year low set in late 2017 of 582,000 barrels a day, down about 40% from the most recent three-month average, the report said.
But within 24 hours, crude prices gave back all of that rally.
Dominick Chirichella of the Energy Management Institute in New York said although Saudi Arabia’s US-focused cuts on crude supply were as bullish a factor as any to oil, they weren’t an immediate game-changer due to worries about a global economic slowdown in 2019, along with anxiety that the US-China trade truce may see symbolic victories rather than actual progress.
“I am not ready to jump into the bullish waters right now," Chirichella added.