Oil prices tumbled more than seven per cent on Tuesday, with United States crude plunging to its lowest in over a year, caught in Wall Street's broader selloff fed by growing concerns about slowing global growth. The global benchmark fell as much as 7.6 per cent to US$61.71 during the session, the lowest since December 2017.
Brent crude sank by about 4% today as fears of supply eclipsing weakening global demand continued.
Oil prices pared losses briefly after data from industry group the American Petroleum Institute showed crude inventories fell by 1.5 million barrels last week to 439.2 million.
Tuesday's drop extended a slide that has been largely unimpeded since early October.
"We are now trading the January 2019 WTI Crude Contract on the Globex-Nymex exchange as today is the last trading day for the December 2018 futures contract", John Thorpe, a commodity broker at Los Angeles-based Cannon Trading, told UPI.
Global stock markets have suffered a shakeout in the past two months, pressured by worries of a peak in corporate earnings growth, rising borrowing costs, slowing global economic momentum and worldwide 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 Credit Suisse, prior to oil's selloff in early October, macro/discretionary funds and CTAs held a net long position that ranked in the top decile over the past five years.
Trump said he won't let the murder of journalist Jamal Khashoggi jeopardize US relations with the Saudis as oil prices may "go through the roof" if the partnership between the two nations breaks.
As mentioned yesterday, the oil market is not yet convinced by OPEC's strategy in believing that it will prevent oversupply, despite talk of a potential cut of up to 1.4mbpd.
USA crude oil inventories posted a drawdown of 1.545 million barrels in the week ending Friday, according to statistics released on Tuesday.
The API release is scheduled for 4:30 p.m. EST (2130 GMT), followed by government data on Wednesday morning.
"While the news that OPEC+ said it would cut 1.4 million barrels of oil per day from production, it's looking likely that the cuts will have to be deeper in order to stabilise the price".
The Organization of the Petroleum Exporting Countries is pushing for a supply cut of 1 million bpd to 1.4 million bpd when it meets on December 6.
Russian Energy Minister Alexander Novak said Monday that the country and its OPEC allies need to watch the oil market in the coming weeks before making any decisions to reduce output.
"The name of the game in the oil market is volatility", International Energy Agency Executive Director Fatih Birol said at a conference in Oslo. Analysts polled ahead of weekly data forecast crude stocks rose about 2.9 million barrels last week.