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Oil prices dropped to two-month lows on Tuesday, hurt by the prospect of rising supply and concerns over global growth.
Light, sweet crude for December delivery has been reduced to 4.8% to $ 66.01 on the New York Mercantile Exchange, on track for its largest one-day drop since July. Brent, the global benchmark, dropped 4.5% to $ 76.22 a barrel.
"It's taking a tough walloping today," said Gene McGillian, research manager at Tradition Energy. "The question now is, how severe of a correction are we going to see?"
On Monday, Saudi Energy Minister Khalid al-Falih reportedly told a Russian news agency that its country will be producing crude oil at 11 million barrels a day, compared with the current average of 10.7 million barrels a day.
"That rhetoric draws parallels to OPEC 's strategy is that it is much less limited capacity and lower overall inventories," said analysts at Schneider Electric.
Stock markets also tumbled Tuesday over global economic growth. The Dow Jones Industrial Average fell 1.4%, close to all of its gains for the year. The S & P 500 fell 1.5% and the Nasdaq Composite Index fell 1.6%, on track to close in correction territory.
"Saudis said," This market was going to be under pressure, but with the Saudis, "said Bob Yawger, director of the future division at Mizuho Securities USA "It's hard to get here and find a bullish situation here."
In recent weeks, crude oil has been reduced to a low tonnage and has risen to a high level.
On Tuesday, analysts said they expect oil-demand growth to slow in 2019 due to weaker economic growth. Earlier this month, both the International Energy Agency and the Organization of the Petroleum Exporting Countries, are proposing their global demand-growth estimates for this year and next.
"There seems to be growing concern about the growth of the markets and the economic outlooks," said Mr. McGillian,
Meanwhile, some analysts are expecting to see another build in crude stockpiles in government data due Wednesday. That would continue to four-week trend of increasing U.S. supplies that has weighed on the market this month.
Mr. Falih's pledge comes amid escalating tensions between Saudi Arabia, the world's largest exporter of crude oil, and the West over the killing of Saudi dissident journalist Jamal Khashoggi. Analysts and experts have speculated that the U.S. and other Western nations have been subjected to sanctions in Saudi Arabia, which may have imposed an embargo that would send prices.
Since President Trump pulled the U.S. out of a 2015 international agreement to curb Iran's nuclear program and reimposed sanctions, production and exports from Iran have fallen.
The IEA said this month Iranian supply fell to a 2½-year low in September. Crude production fell by 180,000 barrels a day month-on-month, to stand at 3.45 million barrels a day last month, the agency said.
The desert oil fields of Sakhir, Bahrain. A further uptick in output from Saudi Arabia would be a "record level" that would "help to ease the supply" in the fourth quarter, say analysts.
Photo:
Hasan Jamali / Associated Press
The Iranian shortfall helped boost Brent above the $ 85-a-barrel threshold for the first time in roughly four years.
Prices were also bolstered by a late September decision by OPEC and its partner producers, led by Russia, to increase production rates. OPEC and its allies agreed in late June to the beginning of the year.
Future gasoline fell 4.3% to $ 1.8243 a gallon and diesel futures fell 3.5% to $ 2.2371 a gallon.
Write to Stephanie Yang at [email protected] and Christopher Alessi at [email protected]
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