Crude oil prices test recent lows at start of holiday-shortened week

Randal Sanchez
November 21, 2018

Oil prices fell about 4 percent on Tuesday, with USA crude plunging to its lowest in over a year, caught up in Wall Street's broader selloff fed by growing concerns about slowing global growth.

Brent crude settled up 3 cents at $66.79 a barrel, strengthening late in the session after earlier hitting a low of $65.27 a barrel.

Front-month Brent crude oil futures LCOc1 had yet to trade.

"The recent slide in oil prices reflects the worsening outlook for oil demand", said Cailin Birch, a global economist at The Economist Intelligence Unit in London.

Crude futures rose ahead of settlement in choppy trade on Monday, supported by a reported drawdown of USA oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts.

Most tankers are booked until December, so South Korea may load Iran oil shipments in January at the earliest, he said. "We ... won't import Iran oil until perhaps after January".

Oil prices on Wednesday recovered some of the previous day's over 6 per cent plunge, lifted by a report of an unexpected decline in United States commercial crude inventories as well as record Indian crude imports. "The Saudis have sent messages that they are going to discuss production cuts, but in the meantime we've moved down so much that guys are just getting out".

WTI crude futures fell $1.03 to $55.43 a barrel.

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Prices are being pressured by concerns over rising production and falling demand. The contract fell as much as 7.7 percent earlier in the session to $52.77 a barrel, the lowest since October 2017.

As both Saudi Arabia and Russian Federation pumped up the volume to near-record levels, Trump surprised the market by granting waivers to eight countries, which the market estimates will keep 1-1.4 million Iranian barrels flowing into the market a day.

Gasoline futures sank 4.5% to $1.5116/gal. Oil may be poised for a recovery and OPEC will probably reimpose supply cuts in the next month or two, according to legendary trader Andy Hall. The 15-member OPEC cartel has also been ramping up production.

Oil prices have been rising steadily since May after the U.S. announced its decision to exit the Iran nuclear deal and re-impose tighter sanctions on Tehran's oil exports.

Concerned about an emerging production overhang similar to the one that led to a price slump in 2014, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of 1 million to 1.4 million bpd.

Front-month futures were little changed in NY after rising 0.9 percent on Monday. The global benchmark crude traded at a $9.42 premium to WTI for the same month.

"Certainly you're seeing sellers get stopped out".

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