Oil’s unprecedented decline deepened as investors fled a market hammered by swelling excess supplies and a darkening demand outlook.
Futures plunged 7.1 percent in New York on Tuesday for the biggest one-day drop in three years. OPEC’s dire forecast for 2019 demand came at a time of steadily rising American production and stockpiles. Meanwhile, U.S. President Donald Trump’s Twitter critique of Saudi Arabia’s planned output cut may dissuade other cartel members from similar moves, given his past comments’ influence on OPEC actions.
“This tweet certainly did not help prices,” said Warren Patterson, a senior commodities strategist at ING Bank NV. “Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump’s call as much as possible.”
West Texas Intermediate futures have fallen for a record 12 sessions on fears that a supply glut similar to the price-killing surplus of 2014 is redeveloping. In London, Brent futures have declined in 11 of the past 12 sessions.
Trump’s tweets have influenced OPEC in the past. In June, Saudi Arabia persuaded fellow oil producers to end 18 months of production cuts and pump more crude in response to falling output in Venezuela and Iran. OPEC leaders made clear Trump’s social media posts were the impetus for the production changes.
Tuesday’s slide came after hedge funds largely gave up on higher prices, which some were saying just weeks ago could reach $100 a barrel. Money managers’ combined bullish positions in WTI and Brent sank to the lowest in 14 months as of Nov. 6, Commodity Futures Trading Commission data show, as long positions shrank and shorts increased.
“Today’s move is just capitulation,” said Nick Gentile, managing partner of commodity trading advisor NickJen Capital Management & Consulting LLC in New York. Traders who analyze chart trends to divine future price moves are “adding to the shorts” while so-called macro traders are “liquidating longs.”
WTI for December delivery dropped $4.24 to end the session at $55.69 a barrel on the New York Mercantile Exchange. Total volume traded Tuesday was about 90 percent above the 100-day average.
Brent for January settlement closed down $4.65 at $65.47 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.63 premium to WTI for the same month.
A closely watched meeting between the Organization of Petroleum Exporting Countries and its allies including Russia on Sunday yielded no formal change in output policy, but delegates warned they may need “new strategies.” Saudi Arabia also unveiled a plan over the weekend to reduce its own shipments by about 500,000 barrels a day next month.
Oil chiefs from Venezuela and Oman indicated they may side with the kingdom on the issue of output cuts. Russian Energy Minister Alexander Novak was less supportive, saying Monday in a Bloomberg television interview that “we have to wait and see how the market is unfolding.”
“That reluctance yesterday and over the weekend by Russia to participate in coming together to cut 1 million barrels sent a negative signal to the market,” said John Kilduff, partner at Again Capital LLC. “On top of it all, there’s tremendous dollar strength happening right now and over the past few days.”
The Bloomberg Dollar Spot Index touched the highest since May 2017 early Tuesday, before slipping back.
The meeting in Abu Dhabi raised the odds of a production cut next month to “fairly high,” and the reduction may be in the 1 million-barrels-a-day range, according to RBC Capital Markets.
In the U.S., crude inventories stowed at the key pipeline nexus in Cushing, Oklahoma, rose by an estimated 2.5 million barrels last week,