Oil Slumps 7 Pct as Equities Slide Fuels Demand Worries
21 November, 2018, 10:43 | Author: Melinda Barton
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.
Fiona Cincotta, senior market analyst at City Index, said yesterday: 'Fears of slowing global growth are fuelling concerns over global demand, just at a time when Saudi Arabia, Russia and the United States continue to ramp up production'.
Analysts said that oil prices continued to recover as the market watches closely for the possible impact of a supply cut.
The speculator group cut its combined futures and options positions on US and Brent crude during the week ended November 13 to the lowest since June 27, 2017.
Crude futures fell to fresh session lows after President Donald Trump issued a statement saying the United States stands by Saudi Arabia following the slaying last month of journalist and USA resident Jamal Khashoggi by Saudi agents. Both benchmarks are now trading at multi-month lows due to high crude stockpiles and disappointing results from the sanctions against Iran that most suspected would result in a tightening of supply.
International Brent crude oil futures LCOc1 were at $63.19 per barrel at 0239 GMT, up 66 cents, or 1.1 percent from their last close. Others think that oil prices will need a major catalyst to rebound from current levels.
Brent crude sank to little more than $62 a barrel, its lowest level since last December.
A US decision to grant waivers to some of Iran's oil customers, who faced the prospect of a drop-off in supply from sanctions that came into force in early November, has also helped soothe concern about availability of crude.
The market pared losses early in the US trading day when energy information provider Genscape reported that crude inventories fell in the latest week, traders said.
Eight successive weeks of increases in USA crude inventories and data showing an increase in US oil rigs count are also hurting the commodity.
Tuesday's crude trading seemed to dispel widespread notions of the previous session's modest price gains being the start of a recovery, with US crude diving to its lowest level in over a year due to mounting concerns over a global slowdown in economic growth. Downside risks in the form of slowing demand and rising U.S. shale production has outweighed the upside impact of Iranian sanctions and potential production cuts from OPEC.
Though it is nearly certain that the group will resort to a production cut, the exact quantum of cut will be decided only at the meeting.
Now, OPEC and its partners are poised to cut output by as much as 1.4 million barrels per day when they meet in Vienna, Austria on December 6.
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