By Amrith Ramkumar
Fresh worries about excess oil supply are dragging down crude prices once again, reinforcing a trend that continues to weigh on the energy sector.
U.S. crude futures slid 3.2% Tuesday to $55.21 a barrel on the New York Mercantile Exchange, their largest one-day drop since Sept. 30. Brent crude, the global gauge of prices, declined 2.5% to $60.91 a barrel on the Intercontinental Exchange.
Both benchmarks logged their fifth decline in the past seven sessions and are well below their April peaks, with analysts anticipating that global oil supply will exceed demand next year.
Driving those wagers are bets on a slowing global economy and a wave of new projects in places such as Brazil and Norway set to add crude to the global market in 2020.
Although oil has rallied alongside global stocks since the U.S. and China made initial progress on a trade deal last month, U.S. prices are still down about 12% in the past six months and are below where they were a year ago.
Tuesday's declines came as analysts looked ahead to weekly U.S. inventory data scheduled for Wednesday. Climbing inventories have bolstered worries about excess shale production even as the number of rigs drilling for oil in the U.S. slides. Figures for the week ended Nov. 8 showed stockpiles rose more than expected and were 3% above the five-year average for this time of year, indicating plenty of crude is available.
Meanwhile, domestic supply rose to a fresh record of 12.8 million barrels a day that week, the Energy Information Administration figures showed, the latest example of resilient shale output despite energy companies preaching supply discipline to help boost prices.
Investors were also weighing a Reuters report Tuesday that said Russia is unlikely to agree to deeper supply cuts at next month's meeting of the Organization of the Petroleum Exporting Countries and its allies, though it could extend existing curbs to support Saudi Arabia, the de facto head of OPEC.
The group has been curtailing output in an attempt to mop up a glut of oil, but some analysts think steeper cuts might be necessary if global-demand growth continues to disappoint.
In one sign investors remain cautious about an extended rebound in oil, net bets on higher U.S. crude prices by hedge funds and other speculators remain well below their peaks from earlier in the year, though they rose in three consecutive weeks through Nov. 12, Commodity Futures Trading Commission figures show. Data for the week ended Tuesday will be released on Friday.
Concerns about excess supply have also hit shares of energy producers. The S&P 500 energy sector fell 1.5% Tuesday, making it the index's worst performer.
A continued drop in natural-gas prices also hurt energy shares Tuesday. Natural-gas futures slid 2.2% to $2.510 a million British thermal units, extending a Monday slide as more moderate weather forecasts in much of the country dented the commodity's heating demand outlook.
Write to Amrith Ramkumar at email@example.com
(END) Dow Jones Newswires
November 19, 2019 16:23 ET (21:23 GMT)
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