Crude fell to the lowest level in a year and a half as concerns over the global economy and turbulence in Washington overshadowed signals from OPEC that it might deepen output cuts.
Futures slid 6.7 percent in a shortened Christmas Eve session in New York, joining a rout in US stocks as investors assess the threat from a US government shutdown.
The tumble left crude prices down 44 percent since reaching a four-year peak in October — including a 19 percent falloff since OPEC and Russia announced major output cuts earlier this month.
“As stocks get taken down and there is nervousness across financial markets, it’s just undercutting prices here,” said John Kilduff, a partner at New York-based hedge fund Again Capital LLC. “The demand outlook continues to be called into question.”
OPEC and its allies on Dec. 7 agreed to cut production, but they have had little success so far in propping up prices.
Additional curbs could be discussed next year, Emirati Minister of Energy Suhail al-Mazrouei has said.
Investors are skeptical the reductions will be sufficient to dent supplies, with US crude output still higher than 11 million barrels a day.
At the same time, a trade dispute between the US and China and the US Federal Reserve’s rate policy are causing concerns over global economic growth.
The S&P 500 Index sank 2.7 percent on Monday, with its energy index shedding 4 percent. The declines were led by Hess Corp, which lost 12 percent, the most in almost three years, after Venezuelan forces temporarily halted ships working at a formation Hess and Exxon Mobil Corp are developing offshore Guyana.
“The main input over the weekend has been the continued intervention by OPEC members,” Petromatrix GmbH managing director Olivier Jakob said. “For now, those statements are ignored by the market because we are in this bearish cycle.”
West Texas Intermediate (WTI) for February delivery fell US$3.06 to US$42.53 a barrel at settlement on the New York Mercantile Exchange.
Total volume traded on Monday was about 30 percent below the 100-day average ahead of the Christmas holiday. WTI peaked near US$77 a barrel in early October.
Brent for February settlement dipped US$3.35 to US$50.47 a barrel on London’s ICE Futures Europe exchange. The global benchmark crude traded at an US$7.94 premium to WTI.
Al-Mazrouei said that OPEC has the option to hold an extraordinary meeting to decide on more output cuts if the current one is not enough.
At a news briefing in Kuwait, ministers from Iraq, the United Arab Emirates and Algeria took turns repeating the message that OPEC would deliver its production curbs and continue to work with its allies.
As for OPEC’s cuts, “they have to follow through on their rhetoric in a significant way” for the price decline to stop, Kilduff said.
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