Oil slips on global supply fears even as OPEC mulls cut

Oil slips on global supply fears even as OPEC mulls cut

As of 10:26 a.m. EST Brent crude front-month prices fell 1.2 percent to $65.95 per barrel, while WTI front-month was 1.1 percent lower to $56.06 per barrel, partly recovering from deeper declines earlier in the session. The contract fell as much as 7.7 per cent during the session to touch US$52.77 a barrel, the lowest since October 2017. The exemptions allow these parties to buy a reduced volume of Iranian crude for the 6-month period, but volumes and details on the waivers remain a bilateral secret, Kallanish Energy notes.

Despite an expectation of OPEC-led cuts, Brent and WTI prices have slumped by 28% and 30% respectively since early October, and the entire structure of the forward price curve has changed.

"For the time being it's more about risk", said Jim Ritterbusch, president of Ritterbusch and Associates.

With the U.S. -China trade dispute threatening to hurt global economic growth, demand for crude oil is expected to drop significantly in the near term.

"Part of the supply issue has been surging United States production", he added. U.S. president Donald Trump added pressure on oil when he said that Saudi Arabia has been "responsive" to requests to keep prices low, calling into question OPEC's resolve to trim output.

The S&P energy sector (XLE -2.6%) supplants tech as the stock market's worst performer, as US crude oil futures sink to fresh one-year lows, falling alongside stocks as investors dump risk assets; WTI -5% at $54.35/bbl, Brent -5.1% at $63.38/bbl.

"The main trend remains bearish as investors no longer believe in a risk of supply tightness for crude", ActivTrades chief analyst Carlo Alberto De Casa said. Saudi Arabia had previously sought crude output curbs of about 1 million barrels a day, while Russian Federation signaled the need for a "balanced decision". "It really is a too-big-to-fail relationship", said Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management in Washington.

However, the United States was considering adding Venezuela, one of its biggest crude suppliers, to its list of state sponsors of terrorism but no final decision has been made, a person familiar with the deliberations said late on Monday.

Brent crude futures were $4.77, or 7.1 per cent, lower at $62.02 a barrel.

Oil prices pared losses briefly after data from industry group the American Petroleum Institute showed crude inventories fell by 1.5 million barrels last week to 439.2 million.

USA crude oil production has soared by nearly 25 percent this year, to a record 11.7 million barrels per day (bpd). With Opec and its allies scheduled to meet in Vienna early December to discuss output plans, the International Energy Agency warned that cutting supplies may have some negative implications.

"The global economy is still going through a very hard time and is very fragile", IEA chief Fatih Birol said on Tuesday.

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