Oil prices were under further strain on Tuesday following falls overnight amid persistent concerns over supplies and a broader fall this week in risk assets.
Brent crude, the international benchmark, fell 3.7 per cent in early London dealings to $57.31 per barrel. West Texas Intermediate, its US counterpart, dropped by 4 per cent to $47.95, hitting the lowest level since September 2017.
The latest leg lower in oil prices, down sharply from October’s peaks, was due “in large part” to broader market ructions on Monday, which saw global developed and emerging market equities drop 1.7 per cent, according to Warren Patterson, commodities strategist at ING. Falls continued, albeit more mildly, into Tuesday, with MSCI’s broad global benchmark off another 0.3 per cent.
Mr Patterson pointed out that there are “no clear signs yet” that the crude oil market is tightening, even after Opec and major partners like Russia struck a deal earlier this month to curb output. He said the tightening will begin at the start of next year when that pact goes into effect.
Investors will be keeping close tabs on a report from the American Petroleum Institute, due late on Tuesday, covering inventories of US crude oil. It comes ahead of Wednesday’s more closely watched weekly data from the US energy department. Analysts expect that crude oil stocks narrowed by 2.47m barrels last week, according to a poll by Reuters.
Tuesday’s fall in the price of oil knocked shares in European energy groups. The Stoxx 600 oil and gas sub-index dropped 1.7 per cent in morning action.