Published: Wed, November 21, 2018
Money | By Bruce West

Oil claws back some losses after 6% plunge

Oil claws back some losses after 6% plunge

Crude oil futures for January ended down $3.77, or 6.6%, at $53.43 a barrel, the lowest settlement price in about 13 months. The worldwide benchmark fell as much as 5.1 percent to $63.36, the lowest since early March.

Oil prices continued its descent with WTI and Brent crude losing as much as 6% in yesterday's session. WTI prices are more 30 per cent lower from near four-year peaks hit in early October, weighed down by surging supply and the selloff in risk assets worldwide.

"When the stock market comes off 8 or 9 percent, it tends to conjure up images of a weak global economy and that feeds into expectations of weaker-than-expected oil demand".

The S&P energy sector (XLE -2.6%) supplants tech as the stock market's worst performer, as USA crude oil futures sink to fresh one-year lows, falling alongside stocks as investors dump risk assets; WTI -5% at $54.35/bbl, Brent -5.1% at $63.38/bbl. That said, given the drop in oil prices, it would be hard for Russian Federation to not take part in the expected OPEC led oil production cuts at the Bi-Annual OPEC meeting on December 6th, despite stating that they would take a wait-and-see-approach.

Further dragging on the oil outlook, OPEC and other forecasters have signaled that the global oil market could produce a surplus in 2019 on slowing demand, despite a dip in Iranian oil exports after US sanctions recently went into effect.

Oil halted a slide near $54 a barrel as investors weighed industry data that showed U.S. crude inventories unexpectedly fell last week against doubts over Opec's plans to cut output. This is reality. Production is rising, led by increasing output from the United States, Russia and Saudi Arabia, which now accounts for about a third of US daily consumption. On Monday, Japan's Ministry of Finance reported that October crude oil imports fell by 7.7 percent from the same month previous year, to 2.77 million barrels per day (bpd).

Oil prices plummeted on Tuesday, as U.S. President Donald Trump reaffirmed Saudi Arabia as "a great ally" and signaled it won't punish Saudi crown prince over journalist Jamal Khashoggi's killing.

Saudi Arabia's oil production surged to a record near 11 million barrels a day earlier this month as the kingdom received stronger-than-usual demand from clients, according to industry executives who track Saudi output.

The Opec envoy for the United Arab Emirates said it was very likely that the group would reduce output but the exact level had yet to be decided. With Opec and its allies scheduled to meet in Vienna early December to discuss output plans, the International Energy Agency warned that cutting supplies may have some negative implications.

The losses were said to be a direct reaction to the S&P 500 index on Tuesday hitting a three-week low, as well as the slump in global stock markets over the past two months; also, news that US president Donald Trump said his country would remain a partner of Saudi Arabia even though "it could very well be" that Saudi crown prince Mohammed bin Salman had knowledge of the killing of Jamal Khashoggi eased concerns about potential oil supply disruptions.

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