Oil slumps on equities’ tumble, Saudi assurance

NEW YORK — Oil prices plunged by about five percent on Tuesday to two-month lows as a sell-off in global equity markets raised worries about demand growth and after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of US sanctions on Iran.

Brent crude futures fell 4.3%, or $3.39, to settle at $76.44 a barrel after plunging five percent to $75.88, the lowest since Sept. 7.

US crude ended the session at $66.43 a barrel, down $2.93, after falling 5.2% to a session low of $65.74, the lowest level since Aug. 20. If US crude drops below $65, a psychologically important figure, that could trigger further technical selling, traders said.

Both contracts notched the biggest percentage drop since July. In post-settlement trade, prices extended losses as data from the American Petroleum Institute (API) showed a large increase in US crude inventories.

“The severity of the drop is pretty striking, but in today’s trading world we have these kind of days a little more often. Now we have to wait and see if this contin- ues to spiral out of control,” said Gene McGillian, vice-president of market research for Tradition Energy in Stamford, Connecticut.

Oil followed Wall Street’s early sell-off, founded on worries over profit growth and concern about Italy’s budget that have sent investors scrambling out of stocks of late. MSCI’s gauge of stocks across the globe at one point shed more than two percent and hit its lowest point since September 2017. “Concerns about what’s going on in the stock markets and the worries about economic growth has spilled over into the oil markets,” Mr. McGillian said, adding that investors will be watching closely to see if the increase in Saudi Arabia’s output materializes quickly.

Saudi Energy Minister Khalid al-Falih told a conference in Riyadh the oil market was in a “good place” and he hoped oil producers would sign a deal in December to extend cooperation to monitor and stabilize the market. “We will decide if there are any disruptions from supply, especially with the Iran sanctions looming,” Mr. Falih said. “Then we will continue with the mindset we have now, which is to meet any demand that materializes to ensure customers are satisfied.”

Mr. Falih said he would not rule out the possibility that Saudi Arabia would produce 1-2 million barrels per day more than current levels in future. The oil market has been concerned that Saudi Arabia might cut crude supply in retaliation for potential sanctions over the killing of journalist Jamal Khashoggi. Mr. Falih said on Monday there was no intention of doing that.

US sanctions on Iranian oil begin on Nov. 4 and Washington has said it wants to stop all of Tehran’s fuel exports, but other oil producers are pumping more to fill any supply gaps.

API data showed US crude stock rose 9.9 million barrels last week to 418.4 million, compared with analysts’ expectations for an increase of 3.7 million barrels. —