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Oil prices dropped about 2 per cent on Tuesday over concerns the world’s stumbling economy could pinch fuel demand as U.S. shale fields surge and cuts by Russia come in below expectations.

Gloomy new global growth forecasts by the International Monetary Fund and signs of a slowdown spreading from China weighed on crude prices as traders worried about supplies rising in 2019 despite lower prices.

The data “reawakened” concerns about demand, which “come at a time when we have more than enough supply,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. “The question is, are these fears going to gain even greater importance in the market?”

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Brent oil futures settled down $1.24, or 2 per cent, at $61.50 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.23, or 1.9 per cent, to $52.57.

Market concerns over the depth of production cuts by the Organization of Petroleum Exporting Countries and its allies, including Russia, helped drive prices lower, analysts said.

Russian Energy Minister Alexander Novak will not fly to Switzerland to attend the Davos World Economic Forum due to changes in his schedule, an Energy Ministry spokeswoman said.

Novak previously said he would meet his Saudi counterpart Khalid al-Falih in Davos, if the minister were to attend.

Falih, who has criticized Russia’s output cuts as being slower than expected, was also unlikely to visit, according to a Bloomberg report.

Russia’s oil production has fallen by more than 30,000 barrels per day (bpd) in January from October’s level, Novak said this month. Russia had pledged to cut 230,000 bpd in the first three months of 2019.

“The Russians are not cutting with the same enthusiasm that the Saudis are,” said Robert Yawger, director of energy futures at Mizuho in New York. “There’s definitely some speculation there may be cracks in the 1.2-million-barrel production cut (global producers) signed up for in December.”

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Data from Saudi Arabia on Monday showed its crude exports in November rose to 8.2 million barrels per day from 7.7 million in October, as production climbed to 11.1 million bpd.

In the United States, where shale fields have boomed over the past year, government data last week showed the nation’s crude production reached a record 11.9 million bpd.

On Tuesday, U.S. data showed oil output from seven major shale formations is expected to rise by 63,000 bpd in February to 8.179 million bpd.

The United States has topped Russia and Saudi Arabia as the largest producer in the world, growing production by almost 2.4 million bpd over the past year, according to the U.S. Energy Information Administration.

“They weren’t expecting that (nearly 12 million bpd production record) for a few months,” said Tariq Zahir, managing member at Tyche Capital in New York. “We saw a very large drop in (U.S. oil drilling) rigs on Friday, but it comes down to whether Saudi Arabia is really going to do these cuts.”

Seventy per cent of the senior energy industry executives plan to boost or maintain capital spending this year, compared with 39 per cent in 2017, a survey by adviser DNV GL showed this week.

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“Despite greater oil price volatility in recent months, our research shows that the sector appears confident in its ability to better cope with market instability and long-term lower oil and gas prices,” said Liv Hovem, who heads DNV’s oil and gas division.

DEMAND CONCERNS

The International Monetary Fund on Monday warned the risk of a pronounced global slowdown has risen because of constrained international trade, and it trimmed its 2019 global growth forecast to 3.5 per cent, from 3.7 per cent in its October outlook.

IMF Managing Director Christine Lagarde said in Davos that the slowing growth does not signal an impending recession, but said the risk of “a sharper decline” in global growth has increased.

China reported the lowest annual economic growth in nearly 30 years on Monday, and its state planner warned on Tuesday that falling factory orders point to a further drop in activity and more job losses.

Singapore-based tanker brokerage Eastport said China’s slowing manufacturing activity is likely weighing on demand.

“There’s a lot of concern in the oil market about China’s weaker economic data,” said Phillip Streible, senior market strategist at RJO Futures.

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