Crude-oil prices plunged on Friday and look like adding to the losses this week with US crude sliding 10% and Brent, the most important global price shedding almost 12%.
That saw the global crude benchmarks – Brent and West Texas Intermediate – fall deeper into a bear market, usually defined as a drop of at least 20% from their most recent peak – in this case, early October.
It was the seventh-straight weekly fall, as investors increasingly focused on oversupply in the market – a situation that has seen Saudi Arabia escalate warnings it could limit supplies to put an end of the continuing sell-off.
Friday’s fall was the biggest one day slide for more than three years and it helped push sharemarkets in the US lower as those in Europe and Asia ignored the slide.
Driven by the falling oil price, the Dow, S&P 500 and Nasdaq had their worst Thanksgiving week performance since 2011.
The prices of other commodities also weakened (see separate story).
The US benchmark contract – the West Texas Intermediate crude for January delivery ended down $US4.21, or 7.7%, at $US50.42 a barrel. That was the lowest close since October 9, 2017.
It was the worst single-session drop for the commodity since a 7.73% decline on July 6 of 2015, according to US data group, FactSet.
Not helping was the holiday-shortened trading session in the US for the Thanksgiving break which saw the fall magnified by low volumes.
Global benchmark January Brent slid $US3.80, or 6.1%, to $US58.80 a barrel. Brent shed nearly 12% during the week.
“Saudi Arabia’s Energy Minister al-Falih asserted [Thursday] that his country doesn’t intend to flood the market with oil. This points to a possible reversal of the latest production increase, which was undertaken in anticipation of the U.S. sanctions against Iran,” Commerzbank analysts said in a note on Friday.
Analysts at US bank Morgan Stanley said it saw “a far greater probability that OPEC reaches an agreement to balance the market in 2019” than not, adding that this would likely support oil prices “in the high-$50s, at least near term.”
Investors are now looking ahead to the meeting of members of the Organization of the Petroleum Exporting Countries scheduled for December 6. Analysts note that President Trump continues to pressure OPEC and the Saudis not to cut production and point to the support the president has given the regime in the scandal around the murder of a US journalist Jamal Khashoggi.
But it does seem the more the price falls the more likely the Saudis are to organise some sort of output cut – suggested at 1.4 million barrels a day at the December meeting.
US stocks rose for yet another week last week – up 4.9 million-barrel to 447 million barrels.
That is still more than 10 million barrels above the same week in 2017. US production remained around 11.7 million barrels a day and the average for the past four weeks was 11.550 million, up more than 20% on a year ago.
That rise is one of the reasons why global prices continue to fall, and the longer the decline, the more febrile will be the US stock market as investors worry more and more about junk bonds and other debt issued by US oil and gas frackers.
