Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. Picture: REUTERS/AHMED JADALLAH
Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. Picture: REUTERS/AHMED JADALLAH

London — Oil prices fell on Wednesday, swept lower by a broad decline across financial markets, as concern about the outlook for global growth and evidence of yet more crude supply wiped out half of this week’s gains.

Producer cartel Opec, with partner countries such as Russia, meets on Thursday to discuss a potential cut in crude output.

In the face of a growing supply overhang, it will be keen to avert the kind of build-up in global oil inventories that sent prices on a 19-month long decline starting in late 2014.

After reaching a truce on trade over the weekend, the US and China appeared once again to be at loggerheads after President Donald Trump threatened “major tariffs” on Chinese imports if the two failed to reach an effective deal.

Stock markets tumbled, taking cyclical assets such as oil with them, as the renewed tension rekindled fears of a global recession. Those concerns were reflected by a sharp drop in longer-term US treasury yields.

Brent crude futures were down 28c on the day at $61.88 a barrel by 10.24am GMT, while US crude futures were down 26c at $52.40.

The oil price rallied by nearly 10% over Monday’s and Tuesday’s sessions, but has now retraced half of those gains.

“Oil sentiment is very fragile given clear event risk at play,” Harry Tchilinguirian, head of commodity strategy at BNP Paribas told the Reuters Global Oil Forum.

“The optimism that emerged following the Group of 20 summit with some progress in US-China trade relations and the announcements of producer cooperation … give way very quickly.”

Saudi Arabia produced a record 11.3-million barrels a day of crude in November, according to a source familiar with the matter.

That marks a rise from October’s 10.65-million barrels a day, which, if confirmed, would mark the second-largest monthly increase since Reuters records began in 1997.

An 11th consecutive weekly build in US crude inventories, the world’s largest and most visible, added to the pressure on the prices.

Official US government oil production and inventory data is due later on Thursday, delayed by one day. A Reuters survey forecasts a decline of 900,000 barrels.

Asian petrol refining margins have fallen to their lowest in seven years, as have European margins, meaning that processing it has become a loss-making business, a worry for both oil investors and producers

Bank of America Merrill Lynch said in its 2019 economic outlook, published on Tuesday, that “most major economies are likely to see decelerating activity”, although it added that “a steady stream of monetary and fiscal stimulus measures” was expected to stem the slowdown.

Reuters