Oil futures declined Tuesday, with expectations for another build in U.S. crude supplies feeding worries over rising global production, Combined with the potential for a slowdown in energy demand, those concerns pushing crude to its lowest finish in more than two months.
The energy market found little traction from the stock market’s recovery a day after an equity drubbing raised fresh concerns over an economic slowdown and weaker energy demand.
West Texas Intermediate crude for December delivery CLZ8, -1.03% fell 86 cents, or 1.3%, to settle at $66.18 a barrel on the New York Mercantile Exchange. Month to date, it was down nearly 9.7%. Global benchmark December Brent crude LCOZ8, -1.40% which expires at Wednesday’s settlement, declined by $1.43, or nearly 1.9%, to $75.91 a barrel on the ICE Futures Europe exchange. It was poised for a monthly loss of 8.2%.
Both crude benchmarks logged their lowest settlements in more than two months.
Read: BP earnings soar on stronger oil prices
Oil prices last week had posted a third weekly decline as sharp losses in global equity markets weighed on demand prospects. U.S. stock indexes were hammered in a volatile session Monday tied to China trade concerns but were moving higher Tuesday as oil futures settled.
Read: Trump says he ‘will make a great deal with China’ on trade, but has more tariffs at the ready
“Crude price weakness was probably driven by the wider negative market sentiment amid speculation about additional U.S. tariffs on Chinese imports,” analysts at consultancy JBC Energy wrote in a note. Crude prices have shaved roughly 13% since hitting four-year highs at the start of October.
Meanwhile, U.S. sanctions on Iran’s oil industry are set to take effect at the start of next week and are expected to tighten global supply and lift oil prices. President Donald Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of sanctions.
A perhaps more important question has been whether other producers will make up the lost supply. Saudi Arabia, the de facto head of the Organization of the Petroleum Exporting Countries, and leading producers outside the cartel, primarily Russia, agreed in early summer to begin ramping up crude production after more than a year of holding back. Comments in recent weeks by the Saudis that they could ramp up output at an event faster rate—reaching at least 11 million barrels a day—have further weighed on prices of late.
Late Tuesday, the American Petroleum Institute, an industry group, reports weekly data on U.S. oil inventories, followed by official U.S. government data Wednesday.
On average, analysts polled by S&P Global Platts expect the government report to show a rise of 3.3 million barrels in crude stockpiles for the week ended Oct. 26. That would mark a sixth straight weekly climb. The analysts forecast supply declines of 2.4 million barrels for gasoline and 2.2 million barrels for distillates, which include heating oil.
On Nymex, November gasoline lost 1% to $1.806 a gallon and November heating oil HOX8, -0.70% settled at $2.26 a gallon, down 1.1%. The November contracts expire at Wednesday’s settlement.
December natural gas NGZ18, +0.50% shed 0.3% to $3.187 per million British thermal units.
While petroleum supply reports continue to drive short-term trading, a closer look at demand can’t be dismissed.
“Many countries’ current account deficits have been affected by high oil prices,” IEA chief Fatih Birol said at an energy conference in Singapore Tuesday, according to Reuters.
“There are two downward pressures on global oil demand growth. One is high oil prices, and in many countries they’re directly related to consumer prices,” he said. “The second one is global economic growth momentum slowing down.”
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.