Oil prices plunged again on Tuesday, with Brent crude seeing its 2018 gains wiped out as concerns about swelling global supplies continued to sour sentiment among investors.
Brent, the international crude oil benchmark, fell as much as 7.6 per cent, or $5.08 a barrel, to hit $61.71, its lowest point in more than 11 months. West Texas Intermediate crude dropped as much as 7 per cent, or $3.99 a barrel, to $52.77 — its weakest level since October 2017.
In Asia on Wednesday morning oil prices recovered some ground , with Brent bouncing 1.5 per cent to $63.48 a barrel while WTI climbed 1.5 per cent to $54.25.
But pledges by big producers such as Saudi Arabia to raise output have stoked fears that the world could be entering a period of oversupply.
US President Donald Trump reinforced these expectations on Tuesday when he called the kingdom a “steadfast partner” despite probes linking the killing of US-based journalist Jamal Khashoggi to Mohammed bin Salman, the Saudi crown prince and de facto ruler of the country.
“They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels — so important for the world,” Mr Trump said.
Speaking to reporters later outside the White House, Mr Trump emphasised the importance of Saudi Arabia’s oil production. “If we broke with them, I think your oil prices would go through the roof,” he said.
“I’ve kept them down; they’ve helped me keep them down. Right now we have low oil prices, or relatively — I’d like to see it go down even lower.”
The president’s statement prompted a new leg down in the oil price, which was already under pressure amid a broad sell-off in assets tied to economic growth. There was also a sharp slide in world equity markets, led by technology stocks.
“Oil prices followed the stock market down as worries about economic growth come into the markets,” said Andy Lipow of Lipow Oil Associates, a Houston-based consultancy.
Brent crude, which reached a four-year high above $86 a barrel in October, has since fallen more than 28 per cent.
Production from US shale fields is also rapidly growing at a time of uncertainty about the oil demand outlook amid a potential slowdown in the global economy.
“We are entering an unprecedented period of uncertainty in oil markets,” Fatih Birol, the head of the International Energy Agency told a conference on Tuesday.
Oil ministers from Opec countries and Russia are due to meet next month to discuss output policy, with possible supply cuts of at least 1m b/d among the options.
Additional reporting by Gregory Meyer in New York and Hudson Lockett in Hong Kong