Oil slumps lower on mar­ket sell-off and record Saudi Ara­bia pro­duc­tion

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Alex Nuss­baum and Grant Smith

OIL prices have plunged, with fu­tures in Lon­don slip­ping be­low $60 for the first time in a year, as a global stock-mar­ket sell-off and signs of record Saudi out­put helped in­ten­sify crude’s late-year freefall. Brent, the in­ter­na­tional bench­mark, dropped as much as 5.9pc.

Traders are fo­cused on the grow­ing risks of a new glut of crude af­ter Saudi Ara­bia’s oil min­is­ter said last Thurs­day that pro­duc­tion from the world’s largest ex­porter climbed fur­ther this month.

Oil joined a swoon in eq­uity mar­kets ner­vous about in­ter­na­tional trade and a weak­en­ing econ­omy. The S&P 500 In­dex fell to its low­est mark since May while Euro­pean mar­kets lost ground af­ter a re­port show­ing a slow­down in Ger­many.

En­ergy com­pa­nies led de­clines, with shale drillers Con­cho Re­sources and EOG Re­sources each down more than 5pc. “Crude’s get­ting shel­lacked,” said Kyle Cooper, direc­tor of re­search at IAF Ad­vi­sors in Hous­ton. “The eq­ui­ties are giv­ing a fore­bod­ing sign for over­all eco­nomic growth. I think that’s what’s dis­turb­ing peo­ple.”

The Saudis have sig­nalled they will throt­tle back on pro­duc­tion in De­cem­ber, but un­less the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries (Opec) and Rus­sia can reach a new deal to con­strain out­put in Vi­enna next month, an­a­lysts see the prospect of sus­tained over­sup­ply in 2019, un­do­ing the group’s suc­cess over the last two years to drain global in­ven­to­ries.

Crude col­lapsed into a bear mar­ket this month af­ter the US al­lowed some na­tions to con­tinue buy- ing Ira­nian crude. Trade ten­sion be­tween Amer­ica and China is rais­ing con­cerns over de­mand and Pres­i­dent Don­ald Trump re­newed his call on Saudi Ara­bia this week to cut prices fur­ther.

These fac­tors pushed up oil’s volatil­ity to the high­est since early 2016. “The in­creased ten­sions be­tween the US and China are adding to the in­tensely sour sen­ti­ment in en­ergy mar­kets,” TD Se­cu­ri­ties an­a­lysts led by Bart Melek wrote in a note to clients last Fri­day. A strike at key French re­finer­ies this week has added an­other threat to de­mand, he noted. “We con­tinue to see fun­da­men­tals im­prov­ing in the near-term, but cau­tion traders against stick­ing their necks out un­til the mo­men­tum shock finds a more solid floor.”

Brent for Jan­uary set­tle­ment fell $3.82, or 6.1pc, to $58.78 a bar­rel at 11.8am in New York. It was headed for a 12pc loss on the week, ac­cord­ing to data from the Lon­don- based ICE Fu­tures Eu­rope ex­change. The global bench­mark traded at a $7.85 pre­mium to WTI. West Texas In­ter­me­di­ate for Jan­uary de­liv­ery lost 6.9pc from Wed­nes­day’s close to $50.88 a bar­rel on the New York Mer­can­tile Ex­change. To­tal vol­ume traded was al­most twice the 100-day av­er­age. There was no set­tle­ment last Thurs­day due to the US Thanks­giv­ing hol­i­day. Bloomberg

US pres­i­dent Don­ald Trump has called for fur­ther price cuts from Saudi Ara­bia

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