Investors have fled oil in droves repelled by a toxic mix that included a global selloff in stocks, rising doubts on OPEC’s commitment to production cuts and escalating trade tensions.
Since hitting a four-year high in early October, crude prices have now crashed about 30 percent. They set a new low for the year on Tuesday, falling more than 6 percent in New York and London, the second huge loss in just over a week. They were little changed in early Asian trading on Wednesday.
Crude joined a rout in equities that saw U.S. stocks plunge on heavy trading, as investors fretted about an American confrontation with China over trade, signs of a retail slowdown and cracks in the credit market. U.S. President Donald Trump added pressure on oil when he said that Saudi Arabia has been "responsive" to requests to keep prices low, calling into question OPEC’s resolve to trim output.
“This had the smell and feel of a liquidation trade,” said Michael Hiley, head of OTC energy trading at LPS Futures in New York. “The Saudis have sent messages that they are going to discuss production cuts, but in the meantime we’ve moved down so much that guys are just getting out.”
West Texas Intermediate for January delivery was 10 cents higher at $53.53 a barrel on the New York Mercantile Exchange as 9:16 a.m. in Tokyo. It sank $3.77 on Tuesday to settle at $53.43 a barrel, while a measure of market volatility jumped to the highest since February 2016. Total volume traded was 51 percent below the 100-day average.
Brent for January settlement dropped $4.26, or 6.4 percent, to close at $62.53 a barrel on the London-based ICE Futures Europe exchange, the lowest since December. The global benchmark crude traded at a $9.10 premium to WTI.
Russian Energy Minister Alexander Novak said Monday that the country and its OPEC allies need to watch the oil market in the coming weeks before making any decisions to reduce output. That wait-and-see approach appears to contrast with Saudi Arabia’s call for cuts, just weeks before a key summit in Vienna.
“The recent slide in oil prices reflects the worsening outlook for oil demand," said Cailin Birch, a global economist at The Economist Intelligence Unit in London. “We expect the pace of growth in both the U.S. and China to slow heading into 2019, which will maintain downward pressure."
A report from the industry-funded American Petroleum Institute offered a bullish note for oil investors, finding that U.S. crude stockpiles fell 1.55 million barrels last week, according to people familiar with the data. That runs counter to a Bloomberg survey of analysts that predicted inventories rose for a ninth straight week. The U.S. Energy Department will release official supply numbers on Wednesday.