Oil prices fall more than four per cent yesterday as investors sell off stocks amid concerns about slowing global economic growth.
Crude futures have already come under pressure after forecasters like Organisation of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) knocked down their projections for global oil demand growth.
International benchmark Brent crude fell by $3.33 a barrel, down 4.2 per cent, $76.50. The contract earlier touched $75.88, its lowest level since Sept. 7.
U.S. light crude dropped $3.03, or 4.4 per cent, to $66.33 a barrel, after earlier hitting a two-month low at $65.74.
The “correlation between oil prices and broader market trading is a driving factor and the volatility in both is enough of a reason to take some money off the table,” said Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions.
Oil prices fell earlier after Saudi Arabia’s energy minister sought for a second straight day to assure markets the kingdom will keep the world adequately supplied with crude.
The killing of journalist and U.S. resident Jamal Khashoggi by Saudi agents has stirred calls for U.S. sanctions on the kingdom. Saudi Arabia said last week it would retaliate against any punishment for the killing.
However, Saudi Energy Minister Khalid al-Falih had said on Monday the country has no intention of cutting back oil supply. Yesterday, he said Saudi Arabia still intends to increase production to meet demand as U.S. sanctions shrink Iran’s crude exports.
The sanctions on Iranian crude go into full effect on Nov. 4. Washington is largely depending on Saudi Arabia to fill the gap left by the loss of the Iranian barrels.
The American Petroleum Institute is scheduled to release data on U.S. crude stockpiles yesterday afternoon, followed by more comprehensive report by the U.S. Department of Energy.
U.S. crude inventories have risen by more than 22 million barrels over the last four weeks, the biggest increase since 2015, when the oil market was heavily oversupplied.
“The weekly inventory data is unlikely to provide any respite, with a fifth consecutive build expected to US oil inventories,” said Matt Smith, director of commodity research at ClipperData.
Reflecting a cautious outlook, traders have been curbing their exposure to oil markets by shutting long positions in crude futures, with fund managers cutting their combined positions by 187 million barrels in the last three weeks, according to exchange and regulatory data.