Oil prices sink on supply glut fears

RISING US INVENTORIES FUEL CONCERNS ABOUT GLOBAL SURPLUS DESPITE OPEC ASSURANCES

For the first time since October last year, Brent settled $3.80 lower at $58.80 a barrel, down 6.07 per cent on the day |

Oil prices plunged yesterday on concerns about oversupply, sending world stock markets lower as lagging energy shares weighed down Wall Street.

Both Brent and US crude fell to their lowest levels since October 2017 and were on course for their biggest one-month decline since late 2014.

Although the Organisation of the Petroleum Exporting Countries is expected to curb output, rising US oil supply has fuelled persistent concerns about a global surplus.

US crude dropped $4.21 to settle at $50.42 a barrel, a 7.71 per cent decline. Brent settled $3.80 lower at $58.80 a barrel, down 6.07 per cent on the day.

Tumbling oil prices pushed US energy shares down more than 3 per cent. As a result, the benchmark S&P 500 stock index ended lower to confirm correction territory, having dropped more than 10 per cent from its record closing high in late September.

Trading volume was light in a shortened session after the Thanksgiving holiday.

MSCI’s gauge of stocks across the globe also fell.

Underwhelming economic data from Europe also dimmed market sentiment, investors said. Surveys of German and euro zone purchasing managers came in weaker than expected.

“Oil dropped, and some of the numbers from Europe have been a little weak,” said John Carey, managing director and portfolio manager at Amundi Pioneer Asset Management in Boston. “Today just confirms the recent weakness due to persisting worries about the economy and the effect of higher interest rates on priceto-earnings multiples, borrowing costs and so forth.”

Dollar rises

The dollar rose yesterday, posting its biggest weekly percentage increase in a month, as risk appetite declined and investors sought the currency’s safety following a steep drop in oil prices that suggested global growth is slowing.

The safe-haven yen and Swiss franc also advanced. The drop in oil prices fuelled a risk-off wave across the board. U.S. crude futures were last down nearly 8 per cent on the day. “Risk aversion has been the main driver all week, with oil prices driving market sentiment,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

“The dollar is better overall for the week because of the risk-off stance, despite a fairly significant pricing out of 2019 rate hike expectations.”

In afternoon trading, the dollar index was up 0.3 per cent at 96.959. It has gained in five of the last six sessions.

After German private-sector growth slowed to its lowest level in nearly four years, the euro dropped into negative territory and was last down 0.7 per cent at $1.1329. The yen rose broadly on fears about the implications of lower oil prices on global growth. The dollar slipped 0.1 per cent against the yen to 112.86 yen, while the euro tumbled 0.7 per cent to 127.86 yen.