Oil down 4 percent as rout runs to 12 days on supercharged selling
by David Gaffen NEW YORK (Reuters) – Oil’s slide accelerated on Tuesday, with U.S. futures dropping to lows not seen in 11 months due to ongoing worries about weakening global demand, oversupply and sell offs across other asset classes, including equities. Oil prices were hit on Monday after U.S. President Donald Trump put pressure on
“OPEC lowered its demand forecast, and that gives them cover for cutting production,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Saudi Energy Minister Khalid al-Falih said on Monday OPEC agreed there was a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to prevent oversupply.
Even as the Saudis floated the possibility of a cut in production, the selling has not abated.
Mizuho’s Yawger noted that the potential pullback in Saudi output has in part already been made up by the sharp bump in U.S. production, which reached 11.6 million bpd in the most recent week, a new record. In addition, Russia has given mixed signals about a cut, with Lukoil CEO Vagit Alekperov saying Monday he did not see cuts being necessary.
“They can’t make up their minds on a cutback or not,” said Yawger. “These strange bedfellows no longer seem like they’re in the same bed anymore.”
Trump on Monday said he hoped OPEC will not cut production, making it clear he wants oil prices to fall.
That led to a sharp price drop on Monday, which continued into Tuesday. As of 12:18 p.m. EST, more than 668 million U.S. futures contracts had traded, far exceeding the full-day average of 583 million contracts.
The steep decline has occurred as speculators have pulled back on their heavy bets on oil. Hedge funds and other money managers have reduced their long position in oil contracts to their lowest since August of 2017 last week.