Saudi Arabia, the world’s biggest oil exporter, has boosted production to 10.7 million barrels a day and is nearing an all-time high.
Oil fell to the lowest level since August after Saudi Arabia pledged to meet any supply shortfall that materialises from Iranian sanctions and as tumbling equities weakened sentiment.
Futures slid as much as 5.2 per cent in New York. Saudi Energy Minister Khalid Al-Falih said OPEC and its allies are in ‘produce as much as you can mode’.
"There are several reasons for the slide in crude oil, chief among them is it’s a risk-off day across all financial markets,"said Bob Yawger, director of the futures division at Mizuho Securities USA. "You’re seeing people flee the commodities and equities space to most likely put their money in safe haven."
Oil stocks were caught up in Tuesday’s broad equities sell-off. The S&P 500 Oil & Gas Exploration & Production Index plunged as much as 4.9 per cent. The gauge has now declined almost 12 per cent so far in October, heading for its worst monthly performance since December 2015.
Concerns over the health of the global economy, leading to the equities sell-off, are seeping into the oil market. Crude has retreated in recent weeks after reaching a four-year high early this month as fears over demand persist. Meanwhile, stockpiles in the US are forecast to have increased for a fifth week, the longest streak since March 2017.
“Equities are weighing on oil prices,” said UBS Group analyst Giovanni Staunovo. “We likely will have more equity volatility going forward with higher rates.”
West Texas Intermediate for December delivery declined $2.88 to $66.48 a barrel on the New York Mercantile Exchange, slipping below its 200-day moving average for the first time in a year.
Brent for December settlement fell $3.13 to $76.70 a barrel on the London-based ICE Futures Europe exchange. It earlier fell below its 50-day moving average for the first time since August. The global benchmark crude traded at a premium of $10.22 to WTI.
US crude inventories probably rose 3.7 million barrels last week, according to a Bloomberg survey of analysts. Meanwhile, supplies at the key storage hub in Cushing, Oklahoma, likely increased 1.5 million barrels last week, according to a forecast compiled by Bloomberg.
The American Petroleum Institute is scheduled to release its weekly count of stockpiles later Tuesday, followed by the US government’s tally.
Gasoline futures fell 3.5 per cent to $1.839 a gallon. US Silica Holdings plunged after the frack-sand producer reported disappointing earnings amid a slowdown in drilling activity.