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Oil prices collapse as glut fear triggers heavy selling
LONDON, Nov 24, 2018 (BSS/AFP) – Oil prices slumped Friday to lows not
seen since last year as concerns over high crude supplies triggered massive
selling, dealers said.
The WTI futures contract, the New York commodities markets’ benchmark,
fell more than six percent on the day, while its European counterpart, Brent
Crude, dropped over five percent.
High global oil production compared to demand was the top reason for
Friday’s selling, while the outlook for a weakening world economy led
investors to conclude that growth would not be strong enough to soak up the
surplus.
“The truth of the matter remains that rising global crude supply coupled
with worrying signs of slowing demand have written a recipe for disaster for
the oil markets,” said Lukman Otunuga, a research analyst at FXTM.
With a December OPEC meeting not expected to make a major dent in
production levels, WTI now had scope to fall to $50 “in the near term”, he
said.
By the mid-European afternoon, WTI held around $51 and Brent just over
$59.
Some analysts said US President Donald Trump also had much to do with
falling oil prices.
– Some say it’s Trump –
“Although most analysts claim that this has to do with supply overhang and
increased production from Russia and Saudi Arabia, the bottom line is that
the US President keeps pushing for lower prices,” said Fiona Cincotta, senior
market analyst at City Index trading group.
“While this is the case it will be difficult to see a return to oil at a
higher level unless oil cartel OPEC decides on a major output cut at its next
meeting on December 6.”
The pound dropped versus the dollar, a day after spiking on news that
Britain and the EU had struck a draft deal over ties post Brexit.
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That came ahead of a weekend summit in Brussels to sign off on an overall
package on the UK’s exit from the European Union in March.
Elsewhere, the euro dropped as data monitoring company IHS Markit said
business growth in the 19-nation eurozone pulled back in November to its
slowest rate in nearly four years, as exports weakened.
– Stocks fall –
Stock markets meanwhile were also under pressure with shares in energy
companies feeling the pain from lower oil prices and investors weighing
headwinds facing the global economy, dealers said.
Key European markets were all down, bar Frankfurt, and Wall Street also
came off to a weaker start.
“US stocks are lower in early action following yesterday’s Thanksgiving
holiday break, with the energy sector seeing some pressure as crude oil
prices are continuing a tumble, while European political uncertainty remains
and China/US trade worries are lingering ahead of next week’s G-20 summit,”
analysts at Charles Schwab summed up market sentiment.
Earlier, Asian stock markets had already plunged into the red.
Chinese shares led the downward charge as Shanghai slumped by more than
two percent, with the tech sector hit hard by a Wall Street Journal report
that Washington is urging its allies to avoid using equipment from Chinese
telecoms giant Huawei.
Worsening trade tensions between the United States and China have
shattered confidence on global trading floors.
“China wants to make a deal. If we can make a deal, we will,” Trump said,
ahead of crunch talks with his Chinese counterpart Xi Jinping at the G20 in
Argentina next week.
The world’s top two economies have been locked in a trade war since the
summer, with the US imposing punitive tariffs on Chinese goods worth $250
billion per year. In retaliation, China imposed tariffs on $110 billion of US
goods.
Washington has threatened to toughen measures even further if the issue is
not resolved before January.
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