Oil traded near its lowest closing level in 15 months in New York as fears over slowing global economic growth compounded concerns that markets face a supply glut in 2019.
Futures were little changed in New York after tumbling 12 percent over the past three sessions, its biggest three-day slump since 2016. Fears over growth persisted as Chinese President Xi Jinping showed little sign of backing down in a trade dispute with the U.S. and the market braced for a Federal Reserve rate hike. Meanwhile, there are doubts over the effectiveness of output cuts pledged by the OPEC+ coalition at a time when American inventories are rising and Russia is pumping more.
“Commodities are not immune to concerns about the global economic outlook, and this is driving negative sentiment across all asset classes,” said Stephen Innes, the head of trading for Asia Pacific at Oanda Corp. in Singapore. “The toxic combination of oversupply worries and global growth distress should see oil prices languish into the year-end.”
Crude has collapsed almost 40 percent from a four-year high in early October, and is set for the worst quarterly decline since December 2014. After taking a battering over the past few sessions, U.S. oil is in oversold territory for the first time since Nov. 30. Skepticism that the Organization of Petroleum Exporting Countries and its allies won’t be able to prevent a glut in the face of surging American shale production and stockpiles has kept a lid on prices.
The industry-funded American Petroleum Institute was said to report that U.S. crude inventories rose 3.45 million barrels last week, adding to fears of an oversupply after a government report on Monday said shale output is set to expand. At the same time, Russian Energy Minister Alexander Novak said the country’s oil production is rising, though it’s preparing to implement reductions to conform with an accord between OPEC and its allies.
While the U.S. and China – the world’s two biggest economies – are planning to hold meetings in January to negotiate a broader truce in their trade spat, a speech by Xi on Tuesday fueled concerns over slowing growth as he pushed back against critics abroad, such as American President Donald Trump, and did not outline new policies that would stimulate the economy. MDT/Bloomberg
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