Oil fell about 3 per cent on Monday, its biggest one-day percentage drop in a month, after an increase in U.S. crude drilling pointed to further supply growth amid continuing concerns about a global economic slowdown.
Brent crude oil futures sank $1.71, or 2.8 per cent, to settle at $59.93 a barrel, while U.S. West Texas Intermediate crude slumped $1.70, or 3.2 per cent, to settle at $51.99 a barrel.
The last time both crude benchmarks saw bigger daily percentage drops was on Dec. 27.
“We’re seeing oil prices really start to break down here,” said Phillip Streible, senior market strategist at RJO Futures in Chicago. “One of the factors that played (into prices) is the rising rig count that we saw on Friday.”
U.S. drillers added 10 oil rigs last week, according to energy services firm Baker Hughes on Friday, in another sign of the expanding record U.S. crude production that has soured market sentiment.
The trade war between Washington and Beijing weighed on futures as investor optimism waned that the two sides would soon end the months-long tariff fight that has damaged China’s economy.
That, coupled with uncertainty about how long the U.S. government will stay open after Washington agreed to end a historic shutdown, dampened investor optimism, said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
“I think both those factors seem to have sparked fears about slowing demand growth, which have been one of the main bearish drivers in the market for a while,” McGillian said.
Crude futures remain on course for their strongest monthly gains in more than two years following production cuts by the Organization of Petroleum Exporting Countries and its allies this month.
Brent has risen nearly 12 per cent so far in January, which would be the largest monthly percentage increase since December 2016. WTI has risen more than 13 per cent this month, the biggest jump since April 2016, when it surged almost 20 per cent.
Investors have added to bets on a sustained rise in the oil price this month for the first time since September, according to data from the InterContinental Exchange.
Much of the demand outlook hinges on China and whether its refiners will continue to import crude at 2018’s breakneck pace.
Industrial companies in China reported a second monthly fall in earnings in December, despite the government’s efforts to support borrowing and investment.