Oil prices dropped Tuesday with investor attention still fixed on supply and as the energy complex was swept up in another bout of “risk-off” jitters driving global markets sharply lower.
“The broader financial market complex was roiled by weakness in tech stocks and the seemingly hard-to-bridge rift between the U.S. and China, at least as far as trade is concerned,” said consulting firm JBC Energy in a note.
That adds to concerns for global thirst for oil at the same time that energy markets are trying to sort an oversupply situation. Groups, including the Organization of the Petroleum Exporting Countries, have cut their oil demand growth outlook for this year and next.
In response, January WTI crude CLF9, -1.54% which is now the front-month contract, traded down 39 cents, or 0.7%, at $56.78 a barrel on the New York Mercantile Exchange.
Global benchmark January Brent LCOF9, -1.74% dropped 77 cents, or 1.2%, to $66.02 a barrel.
Both oil markets earlier this month lapsed into a bear market, defined as at least a 20% pullback from a recent high, and were trading at the lows of the year. The contracts were at a nearly four-year high as recently as early October.
Oil prices ended higher on Monday, finding support from news that the European Union backs a decision by the French government to sanction Iran nationals linked to a bomb plot in France. Reuters reported Monday that EU ministers said technical work could begin on an asset freeze on two Iranians and the Iranian intelligence service.
It was the decision by the Trump administration to grant waivers to major buyers of Iranian crude following the enactment of U.S. sanctions on the Islamic Republic that had fueled global oil market selling pressure. Sanctions had been expected to keep most Iranian oil off the market.
At the same time, the U.S., Russia and Saudi Arabia, all leading producers, are pumping crude at record levels, causing global supply to significantly outrun demand, a monthly update from the International Energy Agency showed last week.
Yet the sharp price drop has prompted OPEC and its allies, including Russia, to signal earlier this month that they could enact a joint production cut. Such a move would come just months after the group decided to ramp up production after more than a year of holding back output. The expanded group next meets Dec. 6.
Read: Saudis to capitulate on oil as U.S. stockpiles surge—analysts
The American Petroleum Institute releases its weekly statistical bulletin at 4:30 p.m. Eastern Time.
Rounding out trading, December natural gas NGZ18, -1.30% fell 1.7% to $4.618 per million British thermal unit. The market is pulling back after a weather-influenced rally took natural-gas futures up nearly 15% last week, hitting their highest in over four years.
December gasoline RBZ8, -2.44% fell 2.2% to $1.5489 a gallon, while December heating oil HOZ8, -1.33% fell 1.2% to $2.0604 a gallon.
Read: How plummeting oil prices will affect drivers this Thanksgiving
Also read: Here’s a handful of reasons why oil’s bear plunge is overcooked: Goldman Sachs
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