LONDON: Oil prices hit their lowest in more than a year on Thursday amid worries about an oversupplied market and future demand following a US interest rate hike.
Global stock also fell after the US Federal Reserve raised rates and maintained most of its guidance for further increases over the next two years.
Some Gulf stock markets were also dragged lower by the news from the Fed, with Dubai retreating about 1.4 percent and Saudi shares down by about 1.7 percent.
OPEC and other producers including Russia this month pledged to cut their output by 1.2 million barrels per day in a bid to support flagging prices.
But these cuts do not kick in until next month and comes on the heels of near record production in Saudi Arabia, the US and Russia.
Saudi Energy Minister Khalid Al-Falih said he expected global oil stocks to decline by the end of the first quarter, but said the market was not being driven by supply and demand as much as speculation, the strength of the US dollar and other geopolitical factors.
“Some of the elements in oil’s bullish story have fallen apart,” Giovanni Staunovo, an analyst at UBS Group in Zurich, told Bloomberg. “US production is higher than expected, concerns over spare capacity didn’t materialize, and the OPEC+ cuts don’t start until January. The correction in equities triggered by the Fed didn’t help either.”
US light crude oil fell 4.9 percent, to a low of $45.82, before recovering later while Brent crude fell by as much as 4.5 percent to its lowest since September 2017.
The decline in prices on Thursday followed a market rally the day before.
“Wednesday’s recovery was short-covering,” said Xi Jiarui, chief oil analyst at consultancy JLC, Reuters reported.
“Investors quickly moved their attention to deteriorating fundamentals in the oil markets, including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production.”
OPEC also plans to release figures detailing voluntary output cut quotas for its members and allies, OPEC Secretary-General Mohammad Barkindo said in a letter seen by Reuters on Thursday.
“In the interests of openness and transparency, and to support market sentiment and confidence, it is vital to make these production adjustments publicly available,” Barkindo told members in the letter. “I would urge Your Excellencies to kindly make positive announcements reinstating your countries’ commitment to implementing the agreed decisions. This is also vital to underpin trust in our decisions and to buttress ourselves from any naysayers who may doubt our commitment.”
Oil tumbles to lowest in a year on Fed hike
Oil tumbles to lowest in a year on Fed hike
- Oil prices hit their lowest in more than a year on Thursday
- Some Gulf stock markets were also dragged lower by the news from the Fed
