Oil showed little sign of recovering from its unprecedented decline as investors flee a market hammered by swelling supplies and a darkening demand outlook.
Futures in New York held losses after plunging 7.1 percent in the previous session in the biggest one-day drop in more than three years. The Organization of the Petroleum Exporting Countries (Opec) warned demand for its crude is falling faster than expected, underlining why Saudi Arabia and some other members are signaling output cuts. Still, President Donald J. Trump’s exhortation that the group shouldn’t cut output is stoking concerns producers may not change course to prevent a glut.
Oil’s record 12-session slide that’s taken it into a bear market has been exacerbated by a US decision to grant some nations waivers from its sanctions, allowing them to continue buying some Iranian crude. Meanwhile, rising American output and inventories are pointing to an emerging glut and speculation is swirling over whether the Opec and its allies including Russia will act to stem the price slump.
“President Trump will likely continue to keep Opec in check, making it more difficult for Opec and non-Opec nations to agree on production cuts,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. Meanwhile, “as a prolonged US-China trade war is now more likely, a slower demand growth scenario is not surprising. It was apparently factored into Opec’s monthly report.”
West Texas Intermediate for December delivery declined as much as 55 cents to $55.14 a barrel on the New York Mercantile Exchange, before trading unchanged at $55.69 at 12:26 p.m. in Tokyo. The contract fell $4.24 on Tuesday. Total volume traded was more than double the 100-day average.
Brent for January settlement edged up 18 cents to $65.65 a barrel on the London-based ICE Futures Europe exchange. The contract slumped $4.65 to $65.47 a barrel on Tuesday. The global benchmark crude traded at a $9.79 premium to WTI for the same month.
In another sign of the severity of the sell off, traders were paying the most in two years for options on futures contracts as they looked for protection—or profit—from the collapse. A measure of implied volatility for options jumped, while preliminary data from the New York Mercantile Exchange shows options volume hit a record.
Global demand for Opec’s oil will be about 31.5 million barrels a day next year, the group said in its monthly report. That’s 500,000 barrels a day lower than its forecast just two months ago and about 1.4 million below current production. Opec also cut its forecast for overall global oil demand growth by 70,000 barrel a day.
The group reported the worsening outlook as traders assess mixed signals on its next step. Following a closely watched meeting of Opec and its allies in Abu Dhabi over the weekend that yielded no formal change in production policy, a producer committee warned that they may need “new strategies.”