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 may deepen output cuts.
Futures slid 6.7 per cent in a shortened Christmas Eve session in New York, joining a rout in U.S. stocks as investors assess the threat from a government shutdown. The latest tumble left crude prices down 44 per cent since reaching a four-year peak in October — including a 19 per cent 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 agreed to cut production on Dec. 7, but they’ve had little success so far in propping up prices. The United Arab Emirates’ energy minister signalled additional curbs could be discussed next year. Investors are skeptical the reductions will be sufficient to dent supplies, with U.S. crude output still above 11 million barrels a day.
At the same time, an ongoing trade war between the U.S. and China and the Federal Reserve’s rate policy are causing concerns over global economic growth. The S&P 500 Index sank 2.7 per cent Monday, with its energy index shedding 4 per cent. The declines were led by Hess Corp., which lost 12 per cent, 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,” said Olivier Jakob, managing director at Petromatrix GmbH. “For now, those statements are ignored by the market because we are in this bearish cycle.”
West Texas Intermediate for February delivery fell US$3.06 to US$42.53 a barrel at settlement on the New York Mercantile Exchange. Total volume traded Monday was about 30 per cent below the 100-day average ahead of the Christmas holiday Tuesday. 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.
Suhail Al Mazrouei, the U.A.E.’s energy minister, said that OPEC has the option to hold an extraordinary meeting to decide on more output cuts if the current one isn’t enough. At a press briefing in Kuwait, ministers from Iraq, the U.A.E. and Algeria took turns repeating the message that OPEC will 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” in order for the price decline to stop, Kilduff said.
–With assistance from Sharon Cho, Heesu Lee, Alex Longley and Alex Nussbaum.
Bloomberg.com
You can read more of the news on source
