Oil prices tumbled more than 5 per cent on Tuesday, falling for the third-straight session as the market grappled with reports that U.S. supply would continue to surge even if demand weakens as global growth deteriorates, which many expect.
U.S. crude oil fell US$3.64, or 7.3 per cent, to settle at US$46.24 a barrel, the weakest since August, 2017. The session low was US$46.11 a barrel.
Global benchmark Brent lost US$3.35, or 5.62 per cent, to settle at US$56.26 a barrel. During the session, Brent hit a 14-month low of US$56.16.
The price for Western Canadian Select was trading at US$30.60 in late Tuesday trading, down US$6.78, or 18 per cent, for the day. That’s down about US$10 from Dec. 13, but well above the record low of less than US$14 on Nov. 15.
The U.S. Federal Reserve kicked off its two-day monetary policy meeting on Tuesday amid a host of calls to pause its tightening cycle or risk harming the U.S. or global economy.
Investor confidence is deteriorating, with more fund managers expecting global growth to weaken over the next 12 months, the worst outlook in a decade, Bank of America Merrill Lynch’s December investor survey showed.
“There was a flood of supply-side news yesterday which, in combination with the demand destruction that the stock market slide implied, got us below US$50 [a barrel for U.S. crude] and that gave us a strong sell signal,” said Bob Yawger, director of futures with Mizuho in New York.
Among the bearish factors, Britain’s largest oil field restarted production, increasing supply, the U.S. government said output from shale would top eight million barrels a day this year and data suggested U.S. crude inventories would rise this week.
Both West Texas Intermediate and Brent benchmarks have slid more than 30 per cent since early October owing to swelling global inventories. Volumes were low on Tuesday heading into the holiday season and ahead of expiry for the front-month U.S. crude-futures contract.
The Organization of Petroleum Exporting Countries (OPEC) and other oil producers agreed this month to curb production by 1.2 million barrels a day (b/d), equivalent to more than 1 per cent of global demand, in an attempt to drain tanks and boost prices.
But the cuts will not happen until next month and production has been at or near record highs in the United States, Russia and Saudi Arabia.
Russian oil output hit a record 11.42 million b/d this month, an industry source told Reuters.
Oil production from seven major U.S. shale basins is expected by year-end to surpass eight million b/d for the first time, the U.S. Energy Information Administration said.
Inventories at the U.S. storage hub of Cushing, Okla., delivery point for the oil-futures contract, rose more than one million barrels from Dec. 11 to Dec. 14, traders said, citing data from market intelligence firm Genscape.
Britain’s largest oil field, Buzzard, restarted after repairs on pipe work, a spokesman for operator Nexen said on Monday. Buzzard produces about 150,000 b/d and is the largest contributor to the Forties pipeline that brings oil to shore from more than 50 fields.
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 b/d.
The market shrugged off news early on Tuesday that Libya’s state oil firm had declared force majeure on operations at the country’s largest oil field, El Sharara, a week after it announced a contractual waiver on exports from the field following its seizure by protesters.
The 315,000 b/d field, located in the south of the North African OPEC member, was taken over on Dec. 8 by groups of tribesmen, armed protesters and state guards demanding salary payments and development funds.
Reuters, with files from staff