Oil drops 4pc on oversupply, equities sell-off

Both crude oil benchmarks have shed more than 30 per cent since early October due to swelling global inventories. — Reuters pic
Both crude oil benchmarks have shed more than 30 per cent since early October due to swelling global inventories. — Reuters pic

LONDON, Dec 18 — Oil prices fell 4  per cent today, dropping for a third consecutive session as reports of swelling inventories and forecasts of record US and Russian output combined with a sharp sell-off in global stock markets.

US crude oil fell US$2.04, or 4.1 per cent, to a low of US$47.84, its weakest since September 2017, before recovering to around US$48.10 by 0920 GMT.

North Sea crude fell US$2.41, or 4.0 per cent, to a low of US$57.20, a 14-month low, and last traded around US$57.61, down US$2.00.

Both crude oil benchmarks have shed more than 30 per cent since early October due to swelling global inventories.



“A large part of the move (lower) is due to a broader market sell-off, with both US and Asian coming under pressure,” said commodities strategist Warren Patterson at Dutch bank ING in Amsterdam.

“Specifically for the , there are no clear signs yet of the market tightening,” he added.

The Organization of the Petroleum Exporting Countries and other oil producers agreed this month to curb production by 1.2 million barrels per day (bpd), equivalent to more than 1  per cent of global demand, in an attempt to drain tanks and boost prices.

But the cuts won’t happen until next month and meanwhile production has been at or near record highs in the United States, Russia and Saudi Arabia, undermining spot prices.

Russian has hit a record 11.42 million bpd this month, an industry source familiar with the data told Reuters.

from seven major US shale basins is by the year-end expected to climb to more than 8 million bpd for the first time, the US Energy Information Administration said yesterday.

Inventories at the US storage hub of Cushing, Oklahoma, delivery point for the oil futures contract, rose more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape.

The United States has surpassed Russia and Saudi Arabia as the world’s biggest oil producer, with total crude output climbing to a record 11.7 million bpd.



With prices falling, unprofitable shale producers will eventually stop operating and cut supply, but that could take some time, and meanwhile inventories keep growing.

“Rising US shale production levels along with a deceleration in growth have threatened to offset Opec+ efforts,” said Benjamin Lu Jiaxuan, at -based brokerage Phillip Futures.

“Market confidence remains extremely delicate.” — Reuters

Source: The Malay Mail Online





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