Oil prices collapse as OPEC sees production outpacing demand

Will Gas Prices Go Up? Saudi Arabia to Cut Production

Oil prices collapse as OPEC sees production outpacing demand

Capital Economics said it was clear that "fears over excess supply in the oil market are starting to build".

Brent dropped $4.03, or 5.8 per cent, to $66.09 a barrel.

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after US sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday.

One analyst, Phil Flynn of Price Futures in Chicago, said of Tuesday's sell-off: "It's like a run on the bank".

Brent crude futures, the global benchmark fell by 7.34 percent to $64.97, while US West Texas Intermediate (WTI) lost $2 in less than 30 minutes to sell at $55.12 on Tuesday evening. OPEC warned demand for its crude is falling faster than expected, underlining why Saudi Arabia and some other members are signaling output cuts.

Brent Crude has now fallen over 25% since hitting a four-year high in early October, while USA oil has lost 28% since its October peak. Oil prices have now fallen for 12 consecutive trading sessions. Kazakhstan said on Tuesday its oil output rose 4.8 per cent to 74.5 million tonnes in the first 10 months of 2018, equivalent to 1.82 million bpd.

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"Twelve days in a row is insane - but there are a lot of pieces putting pressure on the market", said Bob Yawger, director of energy futures at Mizuho.

Saudi Energy Minister Khalid al-Falih said on Monday the Organization of the Petroleum Exporting Countries agreed there was a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to prevent oversupply.

Even as the Saudis floated the possibility of a cut in production, the selling has not abated. As well, production in the US and Russian Federation has bee soaring. Russian Federation has given mixed signals about a cut, with Lukoil chief executive Vagit Alekperov saying on Monday that he did not see cuts being necessary.

This took prices up on Monday but not significantly so. As of 12:18 p.m. EST, more than 668 million USA futures contracts had traded, far exceeding the full-day average of 583 million contracts. "These unusual bedfellows no longer seem like they're in the same bed anymore".

The steep decline has occurred as speculators have pulled back on their heavy bets on oil.

Oil showed little sign of recovering from its unprecedented decline as investors flee a market hammered by swelling supplies and a darkening demand outlook.

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