Prices have declined because of investors' concerns that the market may be oversupplied, and a decision by the Organisation of Petroleum Exporting Countries on December 7 to cut output by 1.2 million barrels per day from October levels starting January 1 has so far failed to significantly stop crude oil's declining trend.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Wednesday after brushing off earlier weakness. One of the reasons for this oil price plunge is excessive supply from US.
OPEC hasn't even started implementing its new six-month agreement to cut output, and already members responsible for most of the reductions have pledged to extend or even deepen it. -China trade war raised concern about the global economic slowdown and affected broader financial markets. Brent crude is at its lowest level since August 2017. Investors have flocked to safe-haven assets such as gold and government debt at the expense of crude oil and stocks.
The U.S. Energy Information Administration will release its weekly oil inventory report Friday, rather than Wednesday, due to the Christmas holiday.
USA crude futures settled at $42.53 a barrel, down $3.06, or 6.7 per cent. Brent crude futures settled down $3.35, or 6.2 per cent, at $50.47 a barrel.
The benchmark crude fell more than 35 percent from their October peak.
After a turbulent eight weeks, during which crude oil lost almost 30 percent of its value, a last minute deal between countries of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries to cut production is expected to lend some stability to the market.
The macroeconomy and its impact on oil demand continue to put pressure on prices. Global equities have fallen almost 9.5 per cent so far in December, their biggest one-month slide since September 2011, when the eurozone debt crisis was unfolding.
At the same time, an ongoing trade war between the USA and China and the Federal Reserve's rate policy are causing concerns over global economic growth.
Anxious that another overabundance could frame, OPEC and its partners including Russian Federation chose not long ago to come back to an approach of cutting generation in 2019, loosening up a choice taken in June 2018 to siphon more oil.
"The planned cuts have been carefully studied, but if it doesn't work, we always have the option to hold an extraordinary OPEC meeting and we have done so in the past", Suhail Al Mazrouei, who is also OPEC president, said in Kuwait.