U.S. Oil Prices Fall to Lowest Since August 2017
December 18 2018 - 3:40PM
Dow Jones News
By Dan Molinski and Sarah McFarlane
-- U.S. oil prices fell more than 7% Tuesday to their lowest in
nearly 16 months as investors worried about rising output from
major oil producers and the possibility of a drop in demand if the
global economy sputters.
-- West Texas Intermediate futures, the U.S. oil standard,
closed 7.3% lower at $46.24 a barrel on the New York Mercantile
Exchange. It was the lowest closing level since Aug. 30, 2017. By
tacking on Tuesday's 7.3% fall to declines Friday and Monday, the
oil market has seen the largest three-day decline in percentage
terms -- a 12.1% drop -- in nearly three years.
-- Brent crude, the global oil benchmark, ended 5.6% down at
$56.26 a barrel on London's Intercontinental Exchange.
HIGHLIGHTS
Global markets: Oil began to decline overnight as European and
Asian stocks fell Tuesday following a sharp drop Monday on Wall
Street, with investors nervous about the outlook for global
economic growth.
And although U.S. stock markets rebounded some Tuesday, oil
prices kept falling throughout the New York session.
"This is just a continuation of oil reeling lower on worries of
slower economic growth that could impact demand next year," said
Eugene McGillian, vice president of market research at Tradition
Energy. "Also, we had U.S. data from the Drilling Productivity
Report yesterday that points to production continuing to rise into
next year."
INSIGHT
Rising output: News reports Monday, which were negative for oil
prices, included data showing Russian crude production was higher
in the first two weeks of December versus November and the return
of the Buzzard field in the North Sea after supply disruption, said
Giovanni Staunovo, commodity analyst at UBS Wealth Management.
Meanwhile, plans by the Organization of the Petroleum Exporting
Countries to cut output are yet to be implemented.
"The cuts will only be implemented in January, we're still in
December, the only one that's cutting is Saudi Arabia," said Mr.
Staunovo.
Shale Growth: Data Monday from the U.S. Energy Information
Administration's monthly Drilling Productivity Report showed U.S.
oil production from seven key shale regions is expected to rise to
a record-high 8.2 million barrels a day next month, versus 8
million this month. It also showed shale regions continue to
increase the amount of so-called DUCs -- drilled-but-uncompleted
wells -- which means they will continue to be able to ramp up
production.
"EIA's latest drilling productivity report layers on
bearishness, as producers keep getting more productive and building
DUCs," said analysts at Baird in a research note Tuesday.
AHEAD
-- The American Petroleum Institute is scheduled to release its
weekly statistical bulletin at 4:30 p.m. EST Tuesday, followed by
the Energy Information Administration's official weekly inventory
report on Wednesday morning at 10:30 a.m. EST.
Write to Dan Molinski at dan.molinski@wsj.com and Sarah
McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
December 18, 2018 15:25 ET (20:25 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.