Oil markets were hit by a sharp risk-off move that dragged crude to fresh lows as investors worried about slower global growth, rising supply and weaker demand.
U.S. West Texas Intermediate (WTI) futures dropped $3.90, or 6.8 percent, to $53.30 a barrel by 2:01 p.m. EST (1901 GMT). Earlier in the session, the contract fell as low as $52.77, its weakest level since October 2017. Brent crude also slid hard, losing $4.50, or 6.7 percent, to $62.29 a barrel after touching $61.71, its lowest point since December 2017.
The selloff came as more than 868,000 front-month WTI contracts changed hands, above the daily average of the previous 10 months. Traders said the move was being driven less by a single oil-specific shock than by the broader collapse in risk appetite across financial markets.
Jim Ritterbusch, president of Ritterbusch and Associates, said the market was reacting to fear rather than fundamentals. “For the time being it’s more about risk,” he said. He added: “When the stock market comes off 8 or 9 percent, it tends to conjure up images of a weak global economy and that feeds into expectations of weaker-than-expected oil demand.”
Wall Street was already under pressure. The S&P 500 index hit a three-week low after weak results and forecasts from major retailers raised concerns about holiday sales, while technology shares kept falling on worries about iPhone demand. Global markets have been shaken over the past two months by slowing earnings growth, higher borrowing costs, weaker economic momentum and trade tensions.
That backdrop has made oil more vulnerable. WTI has now fallen more than 30 percent from its near-four-year peak in early October, while Brent has lost about 28 percent over the same stretch. Analysts also pointed to rising U.S. shale output and a deteriorating economic outlook as reasons traders were turning cautious.
Geopolitics added another layer of uncertainty. Prices edged lower after U.S. President Donald Trump said the United States intended to remain a “steadfast partner” of Saudi Arabia, even though “it could very well be” that Saudi Crown Prince Mohammed bin Salman knew about the killing of journalist Jamal Khashoggi last month in Turkey. Oil markets had been watching for any supply disruption as tensions rose between Washington and Riyadh, but experts said the risk to supplies was limited.
Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management in Washington, said: “I never really understood the premium behind some kind of friction between U.S. and Saudi Arabia from a policy standpoint... It really is a too-big-to-fail relationship.” He added: “I think today what’s driving oil is the continued equity selloff, and oil is really collateral damage.”
Another pressure point was Venezuela. Late on Monday, a person familiar with the deliberations said the United States was considering adding the country, one of its biggest crude suppliers, to Washington’s list of state sponsors of terrorism, although no final decision had been made.
Inventory expectations also weighed on sentiment. Analysts polled ahead of weekly data expected U.S. crude stocks to have risen by about 2.9 million barrels last week, which would mark a ninth straight weekly increase. The American Petroleum Institute was due to release its figures at 4:30 p.m. EST (2130 GMT), followed by government data on Wednesday morning.
Supply trends remained a major concern. U.S. crude production has climbed almost 25 percent this year to a record 11.7 million barrels per day (bpd), while the Organization of the Petroleum Exporting Countries is pushing for a cut of 1 million bpd to 1.4 million bpd when it meets on Dec. 6. The OPEC envoy for the United Arab Emirates said it was very likely the group would reduce output, though the exact level had not been decided.
The International Energy Agency warned that cuts could have “negative implications,” with Fatih Birol, the IEA executive director, saying on Monday: “We are entering an unprecedented period of uncertainty in oil markets.”
Reuters reported from New York, with additional reporting by Ron Bousso in London and Henning Gloystein. Editing was by Marguerita Choy and Paul Simao.
