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)

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