Oil Drops 4 pct as Equities Slide Sparks Demand Worries

Anna Jefferson
November 21, 2018

West Texas Intermediate for January delivery rose as much as $1.29 to $54.72 a barrel on the New York Mercantile Exchange, and was at $54.29 at 11 a.m.in London.

While Trump and emerging but fragile economies such as India would presumably welcome the lower crude prices, Andrew Lipow, president of Lipow Oil Associates, anxious that "The next fear is that as the equities fall as a reflection of slowing economic growth, that's going to depress any growth in oil demand".

Brent crude in London fell by $0.46 and the price of WTI in NY fell $0,29. The worldwide benchmark fell as much as 7.6 percent to $61.71, the lowest level since December 2017.

Oil's slide has been largely unimpeded since early October when WTI prices were near four-year peaks.

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

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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.

Ashley Kelty, oil and gas research analysts at Cantor Fitzgerald Europe, said: "In terms of the collapse today, the wider selloff in equities - sparked by weak retail and tech performance - has further exacerbated fears of weakening global demand amid a weaker economy and the spectre of escalations in the US-Sino trade war".

Oil prices are around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States, as well as a slowdown in global trade.

Trump said he won't let the murder of US-based journalist Jamal Khashoggi jeopardize relations with the Saudis as oil prices may "go through the roof" if the relationship between the two nations breaks.

"I never really understood the premium behind some kind of friction between US and Saudi Arabia from a policy standpoint".

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Expectations for a ninth straight week of USA crude inventory increases also weighed on prices.

But investors remained on edge, with the International Energy Agency (IEA) warning of unprecedented uncertainty in oil markets due to a hard economic environment and political risk. Analysts polled ahead of weekly data forecast crude stocks rose about 2.9 million barrels last week.

The statistical report released by the American Petroleum Institute (API) showed a buildup of 8.79 million barrels in the oil inventories for the previous week.

Record crude imports by India of nearly 5 million barrels per day (bpd) also supported prices, traders said.

The Organization of the Petroleum Exporting Countries is pushing for a supply cut of 1 million to 1.4 million bpd when it meets on December 6.

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"We are entering an unprecedented period of uncertainty in oil markets", IEA Executive Director Fatih Birol told a conference in Norway on Monday.

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