Oil prices slumped on Friday, November 23, 2018, 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 nearly seven per cent on the day, while its European counterpart, Brent Crude, dropped close to five per cent.
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 was just below $51 and Brent just under $60.
Some analysts said US President Donald Trump also had much to do with falling oil prices.
– ‘Difficult’ to see oil recover –
“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.
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.
Fresh fears meanwhile over headwinds facing the global economy saw Asian stock markets plunge into the red Friday, after US markets were closed for Thanksgiving.
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 US 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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