Oil showed little sign of recovering from its unprecedented decline as investors flee a market hammered by swelling supplies and a darkening demand outlook.
Prices have dropped to their lowest level in more than eight months amid fears of a slowdown in demand. International benchmark Brent crude dropped almost 7 per cent to $65.11 (Dh239) a barrel – its lowest level since March – while West Texas Intermediate fell more than 7 per cent to $55.69, its lowest level since November last year.
Futures in New York were little changed after plunging 7.1 per cent in the previous session in the biggest one-day drop in more than three years. Opec warned demand for its crude is falling faster than expected, underlining why Saudi Arabia and some other members are signalling output cuts. Still, US President Donald Trump exhorting that the group should not cut output is stoking concerns producers may not change course to prevent a glut.
Oil’s record 12-session slide that has taken it into a bear market has been exacerbated by a US decision to grant some nations waivers from its sanctions, allowing them to continue buying some Iranian crude. Meanwhile, rising American output and inventories are pointing to an emerging glut, and speculation is swirling over whether the Opec and its allies including Russia to stem the price slump.
“President Trump will likely continue to keep Opec in check, making it more difficult for Opec and non-Opec nations to agree on production cuts,” said Satoru Yoshida, a commodity analyst at Rakuten Securities in Tokyo. Meanwhile, “as a prolonged US-China trade war is now more likely, a slower demand growth scenario is not surprising. It was apparently factored into Opec’s monthly report.”
West Texas Intermediate for December delivery declined as much as 55 cents to $55.14 a barrel on the New York Mercantile Exchange. The contract fell $4.24 on Tuesday. Total volume traded was more than double the 100-day average.
Brent for January settlement edged up 18 cents to $65.65 a barrel on the London-based ICE Futures Europe exchange. The contract slumped $4.65 to $65.47 a barrel on Tuesday. The global benchmark crude traded at a $9.79 premium to WTI for the same month.
Global demand for Opec's oil will be about 31.5 million barrels per day next year, the group said in its monthly report. That's 500,000bpd lower than its forecast two months ago and about 1.4 million below current production. Opec also cut its forecast for overall global oil demand growth by 70,000bpd.
The group reported the worsening outlook as traders assess mixed signals on its next step. Following a closely watched meeting of Opec and its allies in Abu Dhabi at the weekend that yielded no formal change in production policy, a producer committee warned that they may need "new strategies".
Top group member Saudi Arabia said output needs to curbed by about 1 million bpd from October levels. Still, Opec secondary-source data suggests the kingdom fully abandoned cuts for the first time in October. Meanwhile, another key producer Russia signalled it's not ready to act immediately, with Energy Minister Alexander Novak highlighting the need to wait and see how the market develops.
A stronger dollar has also reduced the appeal of commodities priced in the US currency. The Bloomberg Dollar Spot Index was little changed near the highest level in 18 months on Wednesday.