By Dan Molinski and Amrith Ramkumar 

U.S. oil prices sank deeper into a bear market Tuesday, posting their steepest fall in over three years and a record 12 consecutive days of losses, as fears of oversupply and weakening demand gripped the market.

West Texas Intermediate for December delivery settled 7.1% lower at $55.69 a barrel on the New York Mercantile Exchange, its sharpest one-day fall since September 2015. Brent crude was down 6.6% at $65.47 a barrel, entering a bear market, defined as a 20% drop from a recent peak.

The tumble in prices is a reversal from earlier this year when anticipation that Iranian sanctions would shrink global supply sent oil prices soaring. That quickly reversed last month as worries about lower demand amid rising production from Saudi Arabia, Russia and the U.S. propelled crude prices lower.

This week, a report from the Organization of the Petroleum Exporting Countries on higher output and a tweet from President Trump added to the downward momentum in prices.

"There has been a sea change in sentiment," said John Kilduff, a founding partner at Again Capital. "We just flipped supply-wise almost on a dime. It looks like a glut situation."

WTI slumped to its lowest price of the year on Tuesday after a monthly report highlighted OPEC and Russian crude production continued to climb in October, more than offsetting losses from Iran.

Crude production from OPEC members rose by 127,000 barrels a day in October to average 32.9 million barrels a day, the oil cartel said Tuesday in its monthly report. Russia's production rose 50,000 barrels a day, while in Iran, production fell by 156,000 barrels a day.

After two weeks of daily declines, oil prices seemed to be starting a recovery Monday morning after a weekend announcement by major producer Saudi Arabia that it would cut its exports to boost prices and avoid an oversupply.

But then Mr. Trump tweeted Monday, "Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!"

The comments surprised many analysts who said they had suspected Mr. Trump's push for lower oil prices would end after the midterm elections were over.

"Politics are still in play," said Tyler Richey, co-editor of the Sevens Report. "President Trump's tweets directed at OPEC opposing production cuts are another tally in the 'bear' column."

Other factors have also played a role, said Matt Smith, director of commodity research at ClipperData.

"You've also seen the dollar strengthening, which weighs on oil prices, as well as a broader risk-off scenario for commodities as equity markets declined in recent weeks," Mr. Smith said. "It's been a waterfall of selling."

A stronger dollar makes commodities more expensive for overseas buyers. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, closed at its highest level since March 2017 on Monday.

U.S. prices have slid 25% after hitting a multiyear high of $76.41 a barrel on Oct. 3. Driving prices higher had been expectations that U.S. oil sanctions against major producer Iran would create a supply squeeze amid continued rising demand from markets like Asia.

Other top oil producers, mainly the U.S., Russia and Saudi Arabia, began ramping up production to offset the expected drop in Iranian exports.

But those developments collided in early November with Washington's decision to soften its sanctions on Iran and grant waivers to some buyers of Tehran's crude -- propelling crude prices lower into what would turn into a record losing streak.

Additionally, there are increasing signs that oil demand is starting to weaken as trade disputes between the U.S. and China lead to lower growth forecasts for the global economy.

"Basically, we've gone from envisioning tighter supplies six weeks ago to now expecting excess supplies on the market, and demand is starting to falter," said Eugene McGillian, vice president, market research at Tradition Energy.

The gloom in the oil market is partly because Saudi Arabia's efforts to prop up the market aren't enough, say analysts at JBC Energy.

The kingdom said its exports would come in 500,000 barrels a day lower on the month in December. Saudi officials said major producers should look at shaving off 1 million barrels a day of supply in 2019.

Investors will watch for a pair of weekly reports Wednesday and Thursday on U.S. oil inventories, which have been rising sharply in recent weeks and contributing to oil's price decline.

Neanda Salvaterra contributed to this article.

Write to Dan Molinski at Dan.Molinski@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

November 13, 2018 15:24 ET (20:24 GMT)

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