Oil prices slip amid broad market sell-off that outweighs expected OPEC cuts

21 November, 2018, 15:15 | Author: Corey Lynch
  • Oil falls after Russia preaches patience rather than production cuts

Tuesday's crude trading seemed to dispel widespread notions of the previous session's modest price gains being the start of a recovery, with USA crude diving to its lowest level in over a year due to mounting concerns over a global slowdown in economic growth.

International Brent crude oil futures LCOc1 were at $63.39 per barrel at 0747 GMT, up $86 per barrel, or 1.4 percent, from their last close.

Oil's slide has been largely unimpeded since early October when WTI prices were near four-year peaks.

Futures in NY rose as much as 2%, after plunging more than 6% on Tuesday.

Brent crude in London fell by $0.46 and the price of WTI in NY fell $0,29. Consequently, WTI and Brent crude have dropped 30% and 27% respectively from the peak seen on October 3rd.

"When the stock market comes off 8%-9%, it tends to conjure up images of a weak global economy and that feeds into expectations of weaker than expected oil demand", says Jim Ritterbusch of Ritterbusch and Associates.

The S&P 500 hit a three-week low on Tuesday as weak results and forecasts from big retailers fanned worries about holiday season sales, while tech stocks continued to slide on concerns about iPhone sales.

"Rising global growth fears smashed oil markets and saw European and USA shares slide", futures brokerage CMC Markets said in a daily note.

The S&P energy sector (XLE -2.6%) supplants tech as the stock market's worst performer, as USA crude oil futures sink to fresh one-year lows, falling alongside stocks as investors dump risk assets; WTI -5% at $54.35/bbl, Brent -5.1% at $63.38/bbl.

Expectations for a ninth straight week of USA crude inventory increases also weighed on prices.

Investors fled oil in droves on Tuesday, repelled by a toxic mix that included a global sell-off in stocks, rising doubts on OPEC's commitment to production cuts and escalating trade tensions. U.S. President Donald Trump said Saudi Arabia has been "very responsive" to his requests to keep prices low, calling into question OPEC's resolve to trim supply.

According to recent data, U.S.is producing a record 11 million barrels of crude per day, up 18% since the start of this year.

The Organization of the Petroleum Exporting Countries, led by Saudi Arabia, is pushing for the group and its partners to reduce output by 1 million to 1.4 million barrels per day to prevent a build-up of unused fuel.

Russia's energy minister Alexaner Novak has reportedly remarked that the oil market alliance will monitor supply and demand in the coming weeks before deciding on production levels.

The International Energy Agency (IEA), however, warned OPEC and other producers of the "negative implications" of supply cuts, with many analysts fearing a spike in crude prices could erode consumption.

"The global economy is still going through a very hard time and is very fragile", IEA chief Fatih Birol said.



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